Auto Insurance Premium Relief in the COVID-19 Era: Is your insurance company really looking out for you?

While many companies, industries, and individuals have suffered because of the COVID-19 pandemic, personal automobile insurers have reported large windfalls. The reason is simple. In response to the threat caused by COVID-19, governors from across the country issued unprecedented executive orders wisely mandating that individuals stay at home unless they were engaging in specified essential activities. State-wide social distancing and stay-at-home measures led to a drastic reduction in driving and, when you extend this to its logical conclusion, decline in driving-related accidents. And this has had a direct and dramatic impact on the risk profile posed by drivers. As a result of the dramatic decrease in driving and accidents brought about by the pandemic, auto insurers’ premiums became grossly excessive, which is why insurance companies offered premium relief to their policyholders.

Insurers made a show of sharing those savings by sending refund checks to drivers more than a year ago. But subsequent data revealed that these insurers kept much of the coronavirus windfall for themselves. With people driving less during the COVID-19 pandemic, automobile insurers came out ahead an estimated $29 billion last year compared to previous years, according to a new analysis by the Consumer Federation of America (CFA) and Center for Economic Justice (CEJ).

According to the CFA’s and CEJ’s recent reporting, from 2016 to 2019, the amount that auto insurers paid in claims nationally averaged 67.4 cents of every premium dollar collected. In 2020, with the pandemic shutdowns limiting driving, the amount spent on claims plunged to 56.1 cents per dollar taken in. This resulted in insurers collecting $42 billion more in 2020 while providing only $13 billion in what they termed “premium relief” during the early stage of the pandemic.

These staggering figures led the CFA/CEJ’s recommendation that regulators around the country do more to help. To date, California, Michigan, New Jersey and New Mexico have required insurers to make refunds during the spring of 2020 — and California kept requiring refunds after that first wave. With no law mandating similar consumer relief when premiums far outpace claims, the Illinois Department of Insurance merely suggested that insurers share their pandemic windfall with consumers, encouraging in two bulletins issued in 2020 that insurance companies provide relief to assist Illinois consumers during the pandemic. But the relief ultimately provided by these insurers was too little.

Meanwhile, many workers remain at their home working remotely. And the prospect of this changing anytime soon looks dismal, with Chicago recently issuing yet another citywide indoor mask mandate and office workers mostly working remotely, meaning vehicles remain in garages largely unused.

Ultimately, for all the talk from the insurance industry that they’re here to help in your time of need, there has been little real action supporting this promise.

Romanucci & Blandin, LLC, along with co-counsel, is currently litigating cases on behalf of Illinois policyholders against numerous automobile insurers claiming the premium refunds provided have been inadequate and led to large windfalls for these companies. For questions regarding these cases, feel free to contact R&B Senior Attorney David Neiman



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