Auto Insurance Agencies See Reduced Claims Since Virus Outbreak

As more states implement shutdowns in an effort to limit COVID-19’s reach, auto insurance providers run the risk of declines in insurance claims. J. Robert Hunter, Consumer Federation insurance director and Birny Birnbaum, Center for Economic Justice director, wrote a letter asking the state insurance commissioners to “direct insurance carriers to offer premium offset payments.”

“We write to urge you to direct auto insurers in your state to provide premium offset payments to policyholders whose driving has been affected by COVID-19 – specifically, for those policyholders whose miles driven has declined and will continue to remain lower than anticipated at the time of policy rating for the foreseeable future,” a portion of the letter reads.

According to the letter, millions are sheltering in place or have significantly reduced their driving, which leads to consumers being having to pay unreasonable and excessive premiums based on outdated estimates of miles driven. The letter also highlighted how premium offset payments provide relief while retaining the insurers’ ability to “snap back” to prior pricing when mileage returns to the levels the current rates are based.

“All insurers, directly or indirectly, use some measure of miles driven to determine rates, so the actions to contain COVID-19, will result in savings to the system that can be quantified and returned to American consumers,” a portion of the letter reads. “The annual mileage on which their auto insurance premium is based has suddenly and dramatically become incorrect. If a policy was rated based on commuting to work, then anyone who is staying home and only driving to the market for supplies is paying a premium that is now excessive.”

The pair also noted several actions that should be taken in an effort to aid auto insurance consumers, which include:

  1. Direct auto insurers in each state to contact their policyholders and offer premium relief to any policyholder who can demonstrate or attest that their miles driven has been impacted by COVID-19 safety measures.
  2. Direct insurers that such premium relief is permitted by state law and is not a rebate.
  3. Direct insurers to file notices with your department that they will send to policyholders and the process and timing they will use to provide relief.
  4. Direct insurers to report on a monthly basis anonymized information on each request for relief received, and
  5. Encourage drivers to contact their auto insurers for relief.

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