Auto insurers cut rates as customers drive less, file fewer claims

At least five insurers have announced plans to cut rates temporarily through discounts or refunds.
Auto insurers cut rates as customers drive less and file fewer claims. Pictured is traffic along U.S. 19 in Pinellas Park March 11. [Chris Urso | Times]
Auto insurers cut rates as customers drive less and file fewer claims. Pictured is traffic along U.S. 19 in Pinellas Park March 11. [Chris Urso | Times] [ CHRIS URSO | Times ]
Published April 8, 2020|Updated April 8, 2020

Major auto insurers are doling out discounts to customers as driving rates plummet from shelter-in-place and stay-at-home orders.

At least five major insurers plan to reduce premium rates temporarily between 15 and 20 percent through credits or refunds.

“It’s a great gesture,” said Dan Karr, CEO of insurance rating service ValChoice."It’s the consumer that needs help, and they need it desperately."

Auto insurance premiums are based on a number of factors, including how often a vehicle is used and recent accidents. Stay-at-home orders around the country, including in Florida, have reduced the number of claims because vehicles are being driven less.

USAA was the latest insurer to temporarily slash rates on Wednesday. Over the coming weeks, it will give its customers a 20 percent credit for two months of their premiums as long as their policy was active as of March 31. Customers would save a collective $520 million through the initiative, the insurer said.

“We understand the impact this pandemic is having on our country and especially our military community and their families," USAA CEO Wayne Peacock said in a release. “Returning premiums provides timely help for our members."

The San Antonio-based insurer’s move follows several others. Allstate was one of the first insurers to announce a “Shelter-in-Place Payback” program, which will give customers 15 percent of their April and May premiums back through a refund to their bank, Allstate account or credit card, the insurer announced Monday.

American Family Insurance, too, announced Monday that it would issue a payment of $50 per insured vehicle for its customers with a personal auto policy within the next two months. The refunds would amount to $200 million for its 2.3 million customers, the insurer said.

Liberty Mutual Insurance plans to refund 15 percent of two months’ premiums to customers through its Personal Auto Customer Relief Refund. Refunds will come in checks or through the payment method customers used on their most recent payment, the insurer said, and will happen automatically.

GEICO announced plans late Tuesday to give its customers a 15 percent credit for auto and motorcycle policies that are started or renewed between April 8 and Oct. 7. It anticipates the total premium savings will be about $2.5 billion between its 18 million auto and 1 million motorcycle customers.

While the cuts may seem like a boon to consumers, ValChoice’s Karr said the cuts may not go far enough. An analysis ValChoice released this week said insurers could go further with cuts to rates for consumers, and may use the cuts as an opportunity “to gain goodwill through lower prices.”

Other insurers haven’t yet cut rates because of a balance they say they need to strike between pleasing shareholders and customers.

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“Regulators and insurers are working to strike the right balance on expanding temporary arrangements to provide immediate relief for policyholders impacted by COVID,” David Sampson, CEO of the American Property Casualty Insurance Association, told the Los Angeles Times. He added that “now is not the time for arbitrary and artificial calls for national rate decisions.”

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