CFA’s Bob Hunter says that auto insurance companies need to provide more than the $6.5 billion in premium refunds, dividends and credits its currently offering.
Americans are filing for unemployment benefits at levels never seen before, struggling to keep up with their bills. Some segments are working with consumers to make things easier, but critics charged today that auto insurers are not doing enough to help.
More than 80% of the nation’s auto insurance companies are offering cuts in rates, dividend or credits toward future payments, amounting to about $6.5 billion in some form of compensation.
However, the Consumer Federation of America and the Center for Economic Justice alleged during a conference call today that figure is only a “good start,” and the industry is still overcharging customers, who should be seeing their monthly premiums drop by at least 40%, which means that $6.5 billion may need to more than double.
(U.S. drivers set to post biggest decline in miles traveled in a half century.)
“We applaud the many insurance companies that have recognized that they cannot sit on policyholder premium while their customers sit at home,” said J. Robert Hunter, director of Insurance for CFA and former Texas Insurance Commissioner.
Traffic on I-405 in Los Angeles is uncharacteristically light in the wake of the coronavirus.
“But consumers might need double this amount to balance how much they pay with how much they drive this year, and we expect companies and commissioners to help make this right as Americans struggle through this crisis.”
The two organizations claim that the dramatic drop in the number of people on the roads due to the coronavirus pandemic has driven traffic down as much as 90% in some urban areas and at least 60% in the outlying regions. As a result, claims have dropped as much as half, perhaps more. They contend a 50% drop in claims should be, on an actuarial basis, accompanied by a 40% slide in monthly premiums.
“It’s important to know that this is a pretty good start,” said Doug Heller, CFA insurance expert, during the call, adding that some insurers are reviewing the situation, but if they don’t start getting to these bigger premium cuts soon, “They’ll be earning a coronavirus windfall, billions and billions of dollars they’re not entitled to keep.”
(Silver lining? Coronavirus pandemic slashes traffic, sends gas prices tumbling.)
It’s important to know that the Insurance Information Institute says the amount being refunded to Americans is significantly higher than what the CFA and CEJ claim — almost double. The institute, or Triple-I, is a New York City-based communications organization supported by 60 insurance companies.
As more and more people get comfortable working from home, fewer and fewer will be willing to work in an office, potentially easing traffic congestion a bit.
“If the rest of the nation’s private-passenger auto insurers are as generous as the companies the Triple-I knows about, we project insurers will be giving customer refunds, discounts, dividends, and credits totaling $10.5 billion,” said Sean Kevelighan, CEO, Triple-I, in a statement.
The institute’s $10.5 billion estimate is based on its analysis of 14 U.S. auto insurers that announced premium refunds, discounts, dividends, and credits totaling $8.1 billion. The group then extrapolated from there, looking at the industry’s cumulative market share and estimated an additional $2.4 billion more was coming.
The CFA and CEJ concede that some insurance companies have responded better than others, however, it’s not just about how much assistance, but how it works that matters. CFA and CEJ have evaluated each of the companies’ refunds according to a three-part assessment, with three possible points for each part: amount of premium relief; time frame covered by relief; and method of delivery of the relief.
Based on those three, the groups assigned individual grades to 82 of the nation’s largest auto insurance companies. State Farm and American Family both earned A’s. However, they were the only ones earning that top mark.
(Gas prices tumble as commuters stay home.)
The worst two? Erie with an F and GEICO with a D-. Erie got slammed because while it claims to be providing customers with $200 million in relief, it is only promising to cut rates sometime in the future. Meanwhile, the home of everyone’s favorite British chameleon finished at the bottom because its making users wait until they renew their policies before they see any of the $2 billion in help the company promised — a wait as long as six months for some, well after the money will be helpful, critics allege.