POSITIVE SIDE EFFECT – COVID-19 Causing Auto Insurance Savings

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While the national “shelter in place” policy is targeting the stop of the spread of the Coronavirus, it also has reduced the number of traffic accidents across the United States, resulting in insurance premium benefits for many customers of national providers.

COVID-19 has impacted every type of business and service around the globe, including the insurance industry. As the insurance community navigates these unprecedented times, many companies are stepping forward, on their own, to provide much needed relief to their policyholders who may be facing difficult circumstances and an uncertain future.

According to the Missouri Department of Commerce and Insurance (DCI), several insurance carriers who operate in Missouri have made the decision to return a portion of their premiums to assist their customers. To date, Allstate, American Family, Geico, Shelter, State Farm and USAA have all chosen to offer some form of premium relief to their policyholders, and others are poised to do so as well.

On Wednesday, April 8th, Shelter Insurance, a company headquartered in Columbia, Missouri, announced plans to issue payments to auto insurance customers, returning roughly 30% of monthly premium payments for the months of April and May.

“Many of our customers are under unprecedented stay-at-home orders and social-distancing mandates, so they are driving fewer miles and experiencing fewer accidents,” said Shelter Insurance Director of Public Relations Jay MacLellan. “In the interest of providing help to our customers now, when they need it most, Shelter will issue a payment to our policyholders based on our best estimate of the impact of this pandemic on our customers and on Shelter’s business.”

Local agent Monty Mumford and Shelter Insurance indicated customers who paid their premium automatically through a bank account, will receive the money in direct deposit transfer, otherwise, customers will be mailed a check.

On April 9th, State Farm Mutual Automobile Insurance Company, the nation’s largest auto insurer, announced up to a $2 billion dividend that will go to its auto insurance customers.

“State Farm is returning value through a dividend to our customers,” said Chairman, President and CEO Michael L. Tipsord. “We insure more cars than anyone and we see from our claims activity people are driving less. This dividend is one of the ways we’re working to help our customers during this unprecedented situation.”

He noted that with schools and businesses closed, and many customers sheltering in homes, people are driving less right now, so the company is returning value to customers as it anticipates fewer auto claims.

Local agent Brent Fohey indicated that customers do not need to take any action to receive this dividend, which will appear as a credit on their auto policy.

“Ninety-eight percent of my book is made up of mutual customers that will benefit from this program,” Fohey stated.

The dividend is part of the company’s Good Neighbor Relief Program that also includes customer payment options and neighborhood philanthropic relief to the tune of $5 million in donations across the country in direct response to COVID-19 focused on relief and recovery efforts.

The  average State Farm Mutual auto customers can expect to receive a credit of about 25 percent of premium for the time period March 20 through May 31 but exact percentages will vary by state. Every State Farm Mutual auto insurance customer will receive credits applied against bills beginning as early as June.

American Family Insurance will return approximately $200 million to its auto insurance customers.

“American Family Insurance is doing this out of responsibility to our customers. They are driving less and experiencing fewer claims. Because of these results, they deserve premium relief,” said Telisa Yancy, American Family chief operating officer.

The premium relief will come in the form of a one-time full payment of $50 per vehicle covered by an American Family personal auto policy. The typical American Family household with auto coverage has two vehicles, meaning the average relief check will be $100.

Local Agent Chris Harris indicated that American Family expects to complete the printing and distribution of all payment checks within 60 days.

He added that the payment will not impact future rates.

“Because this is based on a decrease in claims due to the majority of customers currently driving less, the funds are not connected to rates and will not result in a rate increase,” Harris stated.

The local agent also indicated that the premium relief payment will not be taxable.

“It would not be considered a taxable event for the customer, as long as the amount the customer receives does not exceed the amount the customer has paid in premium during the calendar year, not the 6-month policy term,” Harris said.

Relief payments will be based on personal auto policies in force as of March 11, 2020, the date the World Health Organization declared COVID-19 a pandemic. Business written after that date is excluded.

The Missouri DCI has taken steps to provide expeditious reviews of all filings related to COVID-19 premium relief strategies that are submitted by insurance companies. The Director of the Department of Commerce and Insurance, Chlora Lindley-Myers, expresses her strong appreciation and gratitude to those companies who have taken the lead in granting a measure of relief to those consumers whose lives have been disrupted by the COVID-19 pandemic.

“I want to personally thank those insurance companies who are stepping forward to do everything they can to provide assistance and relief to Missouri consumers during this critical time for our state and our country,” said DCI Director Lindley-Myers. “These companies are offering premium relief strategies on their own and their leadership, community service and assistance is to be commended. They are providing direct and immediate financial relief to those who need it.”

Companies are rolling out their premium relief strategies according to their best estimates of the impact of the COVID-19 pandemic on their customers and are continuing to evaluate the situation as it evolves.