Insurer American Family Mutual Insurance Co. estimates car insurance policyholders drove 40% fewer miles than normal in the last three weeks of March 2020. Car accidents are down 59% in Los Angeles County since a shelter in place order was given to the county due to the COVID-19 outbreak. As a result, Allstate Corp. and American Family are returning over a combined $800 million to their policyholders.
Allstate is sending out over $600 million in checks and American Family is sending out $200 million. Allstate said that most of their policyholders would be refunded 15% of their car premium in April and May, and American Family is refunding $50 per vehicle insured. American Family says that represents what they’ve already saved due to a reduction in claim volume.
“It is real dollars we expected to pay out this year and no longer have to pay out,” said American Family’s chief operating officer Telisa Yancy. “We are sharing it back right now when our customers probably most need it.”
Yancy said claims from March 11 through April 3 were down 20% to 40% weekly from the same time last year. The World Health Organization declared the COVID-19 outbreak a pandemic on March 11.
Mileage is down “an unprecedented” 35% to 50% in the United States since mid-March, according to Allstate Chief Executive Tom Wilson.
Trade groups say the two companies are the first to refund policyholders for claims they haven’t had to pay out because of the coronavirus outbreak. It is expected by analysts on Wall Street that other companies will soon do the same.
Car insurers are expected by Wall Street to see a positive impact from the COVID-19 outbreak since, with less miles being driven, less accidents are occurring. This financial success during the coronavirus crisis may look bad to consumers struggling during the crisis, however. Providing policyholders with these refunds may help public optics for insurers.
The refunds come after consumer activist groups such as the Consumer Federation of America and the Center for Economic Justice have been asking state insurance departments to encourage insurers who are profiting from the COVID-19 outbreak to give policyholders refunds. Consumer advocates are also encouraging vehicle owners on social media to contact their insurers and ask that their premiums be recalculated due to the outbreak.
“There is no question that the total economic impact of the pandemic will influence the decisions of companies about dividends [to policyholders], but it is too soon to know what that will look like,” said the National Association of Mutual Insurance Companies’ Neil Alldredge.