As Drivers Stay Home, Insurers Should Cut Rates: Consumer Groups

Washington, D.C. – State insurance regulators should direct insurance companies to offer customers premium offset payments to reflect the immediate reduction in expected insurance claims as a result of COVID-19 restrictions keeping drivers off the road, the Consumer Federation of America (CFA) and the Center for Economic Justice (CEJ) wrote in a letter to Commissioners today.

The groups are also urging consumers and businesses whose driving has dropped to contact their insurers and ask for relief.  A copy of the letter is available here.

Robert Hunter, Director of Insurance for CFA, said, “The likelihood of a motor vehicle accident drops radically when the number of cars on the road drops radically.  Consumers who paid auto insurance premiums based on driving an estimated 1,000 miles a month but who are now driving 200 miles a month because they are forced to work at home or their business has closed should get relief from their auto insurers.  Windfall profits for auto insurers and excessive auto insurance premiums should not be another harm visited upon consumers from COVID-19.”

As millions of Americans shelter in place, work from home, or face business closures and layoffs, the number of cars on the road has fallen precipitously and, as a result, the number of daily car accidents will diminish dramatically.

This reduction in claims activity results directly from consumers’ reduced mileage, a key risk factor in safe driving, and the savings should be returned to people impacted by COVID-19 restrictions on movement.

“Imagine if the population density of New York City transformed into the population density of Idaho overnight.  In terms of drivers on the road, that is exactly what is happening in many urban and suburban areas,” the consumer groups wrote. “All insurers, directly or indirectly, use some measure of miles driven to determine rates, so the actions to contain COVID-19, which have radically reduced driving in America, will result in savings to the system that can be quantified and returned to American consumers.”

The groups urged regulators to direct auto insurers to quickly get systems and procedures in place to provide the auto insurance premium relief – just as the regulators have done to get health insurers to offer free testing for COVID-19.

The groups also urged insurers to step up as other industries have done to help consumers – and businesses – in this time of need.  And the groups urged consumers – whether individual or small business – whose driving has been dramatically reduced by COVID-19 precautions – to contact their insurers for relief.

The Consumer Federation of America is an association of more than 250 nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education.