Some Insurers Offer a Break for Drivers Stuck at Home

Some Insurers Offer a Break for Drivers Stuck at Home

The best kind of financial help is the kind that you don’t have to ask for.

On Monday, Allstate and American Family Insurance said they would give their personal auto insurance customers a break, since most of them aren’t driving as much as they did a month or two ago.

The savings don’t amount to a lot. Allstate will give most customers 15 percent of their monthly premium back in April and May, via a credit to their bank account, credit card or Allstate account. American Family will send auto insurance customers $50 for each vehicle on their policies.

But the nature of the action is exemplary — and rare — given the context of a pandemic. People are sick, and many more are struggling. Nobody wants to have to think to call their auto insurer, let alone wait out the call-center deluge afflicting most financial services companies.

Auto insurance companies are in an advantageous position in the quest to eke out a public relations win in these grim times. If people drive less, they crash less. Fewer crashes mean fewer claims. And fewer claims means more premium money sitting around on an insurer’s books. (Regulators in all the states where Allstate and American Family do business generally have to approve their plans to return customers’ cash, but they expect to start sending their refunds soon.)

Mr. Wilson said he would not know how profitable Allstate’s auto insurance operation would be without answering all those questions and more.

American Family threw up its hands in similar confusion. “We’re returning to our customers estimated savings based on our best determination of what we know now,” a company spokesman, Ken Muth, said in an email. “We’ll continue to focus on aligning what we charge in premium to the expected costs associated with providing the insurance coverage, which is primarily paying out claims.”

Doug Heller, an insurance expert with the Consumer of Federation of America, saw all of this coming a few weeks ago. The organization published a letter asking insurance companies to adjust their premiums in anticipation of a likely fall in claims. And his colleague Micah Hauptman has urged customers to call their insurers and ask for a better deal.

Mr. Heller said in an interview that he was surprised at the two insurance companies’ decisions, since there hadn’t been much pressure on them. He said that probably would have changed, though, because state insurance regulators usually keep an eye out for excessive rates.

“They’re collecting all this premium and aren’t seeing accidents or claims, so they have a choice,” Mr. Heller said. “They either start giving back money or have to explain their coronavirus windfall at some point.”

On Monday, I made like a regulator and went to nine other auto insurance companies and asked them whether they intended to match Allstate and American Family.

Source link