Consumer Advocates Call for Larger Car Insurance Refunds

Drivers in various states around the country are finding an interesting side effect to social distancing: auto insurance companies are sending refunds to some of their customers. As Maria Aspan explained in a Fortune article earlier this month, that’s due to the fact that Americans are driving significantly less right now due to the COVID-19 outbreak. Aspan’s article cited Allstate in particular as a company refunding some of the money it’s brought in via insurance premiums. Why?

The company is covering fewer accidents as Americans stay home, and says it has tracked a 35% to 50% drop in driving mileage since states started issuing shelter-in-place and stay-at-home orders last month.

For many Americans, it’s an unexpected bit of extra cash to have during an uncertain economic time. But there’s also an argument to be made that insurers could be doing more — and a recent article notes that the Consumer Federation of America is making that exact point. The article notes that many car insurance policies are based on an average of 1,000 miles driven per month. For people working from home, that amount is much lower.

Companies that sell 82% of the auto policies in the U.S. have announced refunds or credits to drivers worth more than $6.5 billion during the next two months, the federation said.

Some, like State Farm, the country’s largest auto insurer, are giving credits starting in June that amount to a 25% reduction in bills from March 20 through May 31. That’s about $20 per month per vehicle, the company says.

The Consumer Federation of America gave high marks to State Farm and American Family Insurance for their program of refunds and credits. Geico and Erie Insurance were rated much lower — in Geico’s case, because — according to the article — make refunds contingent on a policy renewal. Both insurers and insured are in uncharted territory here, with questions still looming as to what might come next.

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