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Consumer Group Wants Another Round Of Refunds From Auto Insurers

Empty highway
Jeff Chiu
The average auto insurance premium refund last spring was about 15%, according to Consumer Federation of America. By one estimate, the industry gave back $18 billion in relief.

A consumer advocacy group wants auto insurers like State Farm to give back even more money to their customers who are driving less because of the pandemic.

Auto insurers gave back billions of dollars last year as driving—and crashes and claims—plummeted due to stay-at-home orders. Now, the Consumer Federation of America (CFA) says it’s time for another round of relief–and this time, it should be required by state regulators, not just a voluntary gesture.

“We don’t think it’s fair that they should be getting this enormous unearned windfall at a time when many of them have reduced expenses because they have employees working from home,” said Michael DeLong, an insurance advocate with the Consumer Federation of America. “We think consumers are struggling and shouldn’t be paying rates that are so excessive.”

The CFA sent a letter to state insurance commissioners calling for action on refunds. The group points to crash data from four states—Colorado, Maryland, Massachusetts, and Texas—that it says shows people were still driving (and crashing) a lot less in latter part of 2020. There were 23% fewer crashes in September and October of 2020 than 2019, according to CFA’s research.

Last time around, DeLong said only four states required premium refunds: California, New Jersey, New Mexico, and Michigan. California was the only state that has required auto insurers to continue providing refunds beyond June 2020, according to CFA.

“States have broad power under state (laws) to regulate insurance. In all of them, they have the requirement that insurance isn’t supposed to be excessive,” DeLong said.

Last spring, the average premium refunds was about 15%, according to CFA. By one estimate the industry gave back $18 billion in relief.

Bloomington-based State Farm, the largest U.S. auto insurer, was “somewhat more generous” in its givebacks than its competitors, DeLong said. It offered 25% premium refunds, then cut auto rates by 11% on average nationwide. State Farm says those actions totaled about $4.2 billion in relief.

“That’s something. That’s helpful to consumers. But we still think it’s not enough. There need to be more refunds, especially because consumers are hurting so much during this time,” DeLong said.

In response, State Farm said it is “continuously monitoring and adjusting to trends to make sure we’re accurately matching price to risk.”

“Auto rates still remain below pre-COVID-19 levels,” a spokesperson said. “Our data indicates more people are driving, resulting in more auto claims. Our approach is to make incremental adjustments based on driving behaviors to ensure the rates we have in place reflect anticipated driving and claim volume, and to minimize the impact to customers as much as possible.”

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Ryan Denham is the digital content director for WGLT.