In Quarantine America, insurance company pays you.
More than 42 states are under some kind of stay-at-home order. As we're urged to avoid unnecessary travel and practice social distancing in light of the coronavirus, Americans are driving less. According to data from auto insurer Allstate Corporation, states are seeing travel drop by 35-50 percent.
This means fewer accidents, so insurers are spending less money. Two of these insurers want to pass these savings back on to you.
Allstate Corporation, the insurance giant that covers some 16 million households, announced on Monday that it will be refunding up to $600 million in premium payments (totaling roughly up to 15 percent of what customers will pay for coverage throughout April and May).
The company is calling the initiative Shelter-In-Place Payback Checks. Allstate says the payments will go to all auto insurance customers in the U.S. and Canada, regardless of travel rates or if they're under a stay-at-home order in their state.
“Given an unprecedented decline in driving, customers will receive a shelter-in-place payback of more than $600 million over the next two months,” said Allstate CEO Tom Wilson in a company notice on Monday. “This is fair because less driving means fewer accidents.”
Wilson says travel has declined roughly 35–50 percent as an average across states, based on company data.
In a press conference call on Monday, Wilson explained, “We started with one week of data and we sat down and said, ‘Ok, what do we do about this?’ It’s one week of data. We don’t normally price on one week of data,” he said of Allstate's reduction in auto claims due to reduced travel rates. "In about a week and half, we pulled this off. There was not one debate in our company about whether we should do this or not.”
Insurance company American Family Mutual Insurance Company (AFI), an auto insurer in 19 U.S. states, says it's passing back these savings to customers as well. AFI will refund $200 million to its customers, writing all customers a one-time check of $50 for each car they have insured with AFI.
American Family Mutual Insurance (AFI) is calling its payment program the Auto Insurance Premium Relief Payment.
Both companies say that if customers are struggling to make payments due to loss of income, they can reach out to the company and delay payments without penalty.
How much money will I get back?
- AFI: You will receive a one-time payment of $50 per vehicle insured per household with the company
- Allstate: You will receive a one-time payment totaling roughly 15 percent of your premium total for the months of April and May. You can get paid faster through the Allstate Mobile App, the company website says.
Why is this happening?
Less driving means fewer auto accidents, which means fewer insurance claims, which means the insurance companies have aren't spending the money you pay them.
Dan Karr, CEO of data analytics/"insurance watchdog data analytics company ValChoice, told CNN Business that an 85 percent reduction in overall claims, based on the data, would be a "conservative estimate"—meaning insurance companies overall are saving way, way more than they're admitting and sending back to you.
But Allstate spokesperson Justin Herndon says this is an early initiative, and it's not necessarily the sum of the company's response, arguing it's too soon to predict how these patterns play out over time. He says the company may consider making more refunds in the future based on the trajectory.
"We decided to act quickly to put our customers first. This is something we'll keep looking at," he said.
Others are praising the move by AFI and Allstate, urging other agencies to follow suit as we all face this economic crisis. J. Robert Hunter, director of insurance for the nonprofit Consumer Federation of America says it's an important first step:
"Is it enough? Probably not," Hunter said in a statement. "[But] Allstate and American Family deserve praise for their industry leadership on this vital first step. While it's too early to tell if the amounts promised are enough to reflect the big drop in auto accidents, the actions by American Family and Allstate are the right thing to do to help policyholders beleaguered by Covid-19 restrictions and job loss. We urge other insurers to take similar actions quickly."
But will they? We don't know.
State Farm announced it will decide on a trajectory for its response by the end of the week, assuring consumers that State Farm is "closely monitoring our automobile insurance losses and are considering how best to take this into account and return value to our auto insurance policyholders."
Insurance giant Progressive says it also has plans in the works, but isn't quite sure what they'll be, saying in a statement, "[Progressive is] exploring how to best return some premium to customers to reflect the decreased exposure that comes with less frequent driving during the pandemic and expect to have those plans in place soon."
Is your insurance company issuing refund checks based on a reduction in accidents? Should this be a recurring practice, or a one-off choice? Let us know what you think.