The best type of financial assistance is the kind that you do not have
to request for. On Monday, Allstate and American Household Insurance stated they would give their individual automobile insurance consumers a break, because most of them aren’t driving as much as they did a month or more back.
The cost savings don’t amount to a lot. Allstate will offer most customers 15% of their month-to-month premium back in April and May, through a credit to their checking account, credit card or Allstate account. American Family will send out automobile insurance clients $50 for each automobile on their policies.
But the nature of the action is excellent– and uncommon– provided the context of a pandemic. Individuals are ill, and a lot more are struggling. Nobody wishes to have to believe to call their auto insurer, let alone wait out the call-center deluge afflicting most financial services business.
Vehicle insurance provider remain in an useful position in the quest to eke out a public relations win in these grim times. If individuals drive less, they crash less. Less crashes indicate fewer claims. And fewer claims means more superior money sitting around on an insurance company’s books. (Regulators in all the states where Allstate and American Household operate usually have to authorize their plans to return customers’ money, but they anticipate to start sending their refunds quickly.)
“We understand there’s been a significant decrease in miles driven and declares filed for personal automobiles since the pandemic started limiting people’s activity,” American Household wrote in a Frequently Asked Question on the payments. “We are not seeing comparable claim trends in our other lines of insurance coverage, such as property owners where submitted claims are increasing, likely from individuals staying home more, leading to more accidents.”
American Household’s relative largesse does raise a concern though: Just how great have the stay-at-home orders been for vehicle insurance providers’bottom lines? Allstate’s chief executive, Thomas J. Wilson, stated the company was acting upon relatively little information right now. But what it has gathered was mind-blowing. “After one week’s worth of data can be found in, we knew this was substantial,” he informed me. “And it was less than two weeks from when we first saw the information to when we made this announcement.”
Wilson stated that driving to work was typically about one-third of individuals’s overall miles on the road. But there are numerous unknowns insurers are still dealing with as an outcome of the stay-in-place orders, he stated.
Individuals who are still driving are driving much faster, based upon Allstate’s data. Will they crash more and do more damage when they do have a wreck? For how long will the pandemic last? When it ends, will everybody still want to– and get to– work from home two times a week?
Wilson said he would not know how successful Allstate’s automobile insurance coverage operation would be without addressing all those concerns and more.
American Household threw up its hands in comparable confusion. “We’re returning to our customers approximated cost savings based upon our finest determination of what we understand now,” a company spokesperson, Ken Muth, said in an e-mail. “We’ll continue to concentrate on aligning what we charge in premium to the anticipated expenses related to supplying the insurance protection, which is mainly paying claims.”
Heller said in an interview that he was amazed at the two insurer’ decisions, since there hadn’t been much pressure on them. He stated that most likely would have changed, however, because state insurance regulators generally watch out for extreme rates.
“They’re collecting all this premium and aren’t seeing accidents or claims, so they have a choice,” Heller said. “They either start giving back money or have to discuss their coronavirus windfall at some point.”
On Monday, I made like a regulator and went to nine other auto insurance companies and asked whether they meant to match Allstate and American Family.
So far, nobody is, but a couple noise close. A Progressive spokesman said that the business was “checking out how to finest return some premium to consumers” and that it anticipated to have those plans in place “quickly.” And State Farm said its authorities were “carefully monitoring our car insurance loss trends and are considering how best to take this into account and return worth to our automobile insurance policyholders. We expect a choice in this regard by the end of the week.” USAA said: “We are checking out alternatives to continue serving our members well during this difficult time. We’ll share more in the coming days.”
Others were unclear. A Liberty Mutual spokesman said the company was “continually assessing ways that we can support our clients.” And from Nationwide: “We continue to assess all of our alternatives.” Travelers said: “We are working with our customers and their agents to resolve their changing circumstances and continue to consider a variety of programs to support them further in this rapidly evolving circumstance.”
Others did not right away answer my questions on Monday: Farmers, Geico and Chubb.