Not All Michigan Auto Insurance Companies Are Doing Pandemic Refunds

Apr. 8--Many Michigan auto insurance companies are still deciding whether to give refunds or price adjustments to customers because of the coronavirus pandemic, which is causing a big drop in miles driven and the risks for accidents.

As of Tuesday, Allstate and Liberty Mutual were the only major auto insurers with business in Michigan to announce refunds. For both companies, the refunds will be approximately 15% of each customer's monthly premiums for April and again for May.

Separately, Geico said it would provide a 15% credit to its auto and motorcycle customers as their policies come up for renewal between April 8 and Oct 7.

Allstate's refund was prompted by data showing that driving is down 30% to 50% across the country as states such as Michigan have enacted stay-at-home orders, said Glenn Shapiro, the company's president of personal property liability.

That decline in miles translates into fewer crashes and fewer insurance claims, he said. Allstate says it has about an 8% market share in Michigan.

"Michigan is a relatively high premium state, so that 15% will be a larger amount than some of those averages across the country," he said.

Dan Karr, founder of ValChoice, a consumer website for insurance products, said that auto insurers are undoubtedly making "windfall profits" across the country right now as many of their customers stay at home and drive a lot less.

"Eight-five percent of accidents are in heavy traffic, and there's no heavy traffic now -- it's gone," Karr said. "So the cost of insuring cars has just dropped like a free-falling stone."

Allstate received much positive news coverage for its refund announcement on Monday.

Penny Gusner, a senior consumer analyst with CarInsurance.com, said that publicity could "shame" other auto insurance companies into returning money to their own customers.

Liberty Mutual's refund decision, which also applies to its Safeco customers, was announced Tuesday in the wake of Allstate's. Liberty Mutual and Safeco have about a 4% market share in Michigan.

"Before the age of social media, the insurance companies may not have felt the pressure to follow suit, but now it is easy for many to pile on social media of how a company could do more and better for its customers," Gusner said in an email.

A Michigan representative for State Farm Insurance told the Free Press that the insurer is closely monitoring its loss trends and expects to make a decision about any potential refunds by the end of the week. Representatives for Progressive and AAA Michigan said their companies also are watching the trends.

"We're also exploring how to best return some premium to customers to reflect the decreased exposure that comes with less frequent driving during the pandemic, and expect to have those plans in place soon," Jeff Sibel, a Progressive spokesman, said.

Aside from any pandemic-related refunds, Michigan's highest-in-the-nation auto insurance rates are expected to decline in July when an overhaul of the state's no-fault insurance system takes effect. Drivers will not learn how much their premiums could go down until later this spring.

Some insurers that have yet to offer pandemic-related refunds are nevertheless giving their customers a reprieve from policy cancellations for nonpayment during the coronavirus crisis, which has seen unemployment claims skyrocket.

"Companies are stepping up to offer different types of payment relief, suspend policy cancellations, waive fees and extend some coverages to support their customers who are facing economic hardship," said Erin McDonough, executive director of industry group the Insurance Alliance of Michigan.

Contact JC Reindlat 313-222-6631 or jcreindl@freepress.com. Follow him on Twitter@jcreindl. Read more on business and sign up for our business newsletter.

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