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With less driving, should insurers give bigger discounts?



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Aimee Picchi, Special to USA TODAY
Published 6:04 a.m. ET May 23, 2020

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Drivers should get even bigger car insurance discounts, consumer advocates argue, citing the drop of miles driven and accident claims during the coronavirus pandemic.

While auto insurers are giving customers average premium refunds of about 15% these drivers are owned much more —twice as much — advocates argue.. 

A 30% discount would, in fact, reflect a roughly 50% decline in miles driven and accident claims during the crisis while tempered by some higher insurer costs, such as a likely rise in unpaid policies, says Birny Birnbaum, an economist and executive director of Center for Economic Justice, which analyzed pandemic driving and claims in a May study. Given the change in driving patterns, auto insurers’ rates “became excessive overnight,” Birnbaum adds.

The pandemic has upended daily patterns for the nation’s more than 220 million licensed drivers. For many, the typical commute of 55 minutes behind the wheel has disappeared as they worked from home. That’s prompted some consumers to hope for a price break from their insurers. Given that the typical consumer pays about $1,400 annually to insure their car, it’s not an insignificant financial issue.

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One of those drivers is John Johnston, a computational specialist from Perry, Michigan, who is largely working at home during the pandemic. He’s no longer making a 30-mile daily commute to his office or taking frequent family trips to Canada or driving to restaurants and theaters with his wife. 

“I’m barely driving,” he says. 

When his auto insurer emailed him to say he’d receive a refund for April and May, he said he was expecting about $100 off his annual bill of about $1,800. Instead, he was given a refund of $35.11 — or less than 10% of the cost of insurance over two months. 

“I expected it to be underwhelming, but not that underwhelming,” he says. 

Other drivers say they are confused by the refunds offered by their insurers. Shauna Dillenbeck of Boise, Idaho, says her insurer, State Farm, told her it had earmarked billions in refunds for customers — but she has yet to see a reduction in her monthly $160 insurance bill.

“I would like to have seen maybe 50% off,” Dillenbeck says, noting that she’s driving about 10 miles a month compared with 500 miles a month before the pandemic. 

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State Farm says Dillenbeck and other customers will likely see refunds on their June statements. Those credits will reflect a 25% discount for premiums from March 20 through May 31st. The company is also reducing its auto rates by an average of 11%, although the rate reduction will go into effect when the customer renews their policy.

State Farm has offered one of the better responses to consumers, according to Birnbaum. His group has given the insurer an “A” rating for its response. But other insurers have earned a poor grade, including GEICO, which scored a D-. GEICO is offering a 15% credit to customers who renew their polices between April 8 and October 7, which means some customers may wait for months to see a refund.

For its part, GEICO said in a statement that its refund policy is geared to “relief based on the full policy term.” The company said it also won’t cancel policies for non-payment. It says its actions “should allow our customers a smoother transition to normalcy.”

Here are steps you can take if you aren’t happy with the refund or response from your auto insurer. 

Call to ask for an adjustment

The first step is to call your insurance company to ask for a refund on your current policy, Birnbaum says. You may be unlikely to see a refund of more than 15%, but consumers who are driving less in the pandemic should also ask for a rate reduction based on your lower mileage, he recommends. 

Drivers who log less than 5,000 miles a year could save as much as 30% compared with those who drive 15,000 miles a year, according to a 2016 study from Insurance.com. 

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Shop around for a new policy

If you don’t think your insurer is providing enough relief, you could shop around for a new policy, Birnbaum notes. While the typical refund is 15%, some insurers are offering more, such as State Farm’s 25% refund. 

Complain to the state 

Because insurance is regulated on the state level, you should take your complaints to your state insurance department, Birnbaum says. Only two states — California and New Jersey — have ordered auto insurers to provide premium refunds to their customers, Birnbaum says. Consumer complaints could spark additional state insurance regulators to take action. 

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