According to the Insurance Information Institute, insurance companies in the United States have issued over 14 billion dollars in premium refunds and credits since the start of COVID-19. Perhaps you were among the many Americans who saw one of these credits? With the pandemic, our dormant cars caused a 10 percent drop in auto insurance expenditures between June 2019 and June 2020.
Why The Refunds?
The Institute of Transportation Engineers maintains an ongoing archive of how COVID-19 has changed traffic patterns across the United States. Cities of all sizes reported reductions in daily traffic, which inevitably fueled the recent string of auto insurance refunds.
For example, in the last two weeks of March, a 30 percent reduction in vehicle miles traveled was recorded in the San Francisco Bay Area and Los Angeles County. Traffic delays and congestion in the Bay Area and Los Angeles dropped by an incredible 80 percent during that timeframe. Outside of California, Detroit and Seattle saw the most substantial declines in traffic.
By contrast, Fort Collins, Colorado, reported travel reductions between 45 and 55 percent, while traffic in Overland Park, Kansas, was anywhere from 50 to 60 percent below normal between March 25th and April 19th. Meanwhile, in Wisconsin, officials say traffic levels decreased by more than 40 percent. Likewise, Sioux Falls, South Dakota, the state’s largest city, saw a decline in daily commuters, according to the Argus Leader.
Will COVID-19 Drop My Auto Insurance Rate?
It seems the answer would be yes, but it’s not exactly that cut and dry. Setting aside the numerous factors that determine your auto insurance premium, seeing a rate drop now during COVID-19 might merely come down to who your provider is. It also depends slightly on the vantage point.
“With respect to COVID-19, rates didn’t go down, but consumers received refunds and dividends from the insurer,” said Robert Lajdziak, Senior Consultant for insurance intelligence at J.D. Power.
“It really depends who you’re insuring with,” added Kristine Lee, Licensed Insurance Agent and SEO Content Strategist for The Zebra. “We’ve noticed insurance companies issuing partial refunds and doing it automatically without any action needed to be taken by the policyholder.”
State Farm was among the many who sent partial refunds to policyholders. In early April, State Farm announced they would issue dividends for premiums paid between March 20th and May 31st. “On average, customers will receive a credit of about 25 percent of the premium paid for that time frame,” said Tammi Estes, Public Affairs Senior Specialist for State Farm.
Allstate, Geico, Farmers, Progressive, USAA, and numerous other providers sent premium refunds between 15 and 20 percent to their customers earlier this year.
State Farm went beyond premium refunds, however, and unveiled plans to reduce auto rates in every state. Data gathered by State Farm, which prompted the announcement, shows a considerable decline in miles driven with fewer accidents. “Those premium reductions will average 11 percent, totaling $2.2 billion in savings for its customers,” said Janet Ruiz, Director of Strategic Communications for the Insurance Information Institute.
“Between the dividend and auto rate reductions, auto customers should see about $4.2 billion in total savings,” Estes said.
In hindsight, State Farm’s move was a good one. In Illinois, The Chicago Tribune reports that Allstate, American Family Insurance, Progressive, Geico, Erie Insurance, and The Travelers Company are now facing a lawsuit. The suit alleges that when compared to State Farm, these companies did not provide adequate premium refunds.
What if COVID-19 Lasts Even Longer?
It’s important to acknowledge the distinction between a temporary credit for policyholders and an actual lower rate. As it concerns our individual auto insurance rates, there may be little change regardless of how long the pandemic continues. “If auto insurers continue to experience a sustained reduction in auto claim frequency, this could lead to additional premium decreases,” Ruiz explained, noting how insurers rely on year-over-year data to help determine premiums.
The keyword is “sustained.” Unless there is a decrease in accidents and claims, and that decrease sustains itself, consumers will likely not see a rate reduction even with COVID-19. “The decrease in accidents and claims would have to be substantial, and it would have to be prolonged for years,” Lee said. “However, it’s still too early to say how rates will ultimately be affected after this is over.”
The trouble is, despite the decrease in traffic throughout 2020, our roads didn’t become safer. Preliminary estimates from the National Safety Council for May 2020 show that road users in the U.S. were at a higher risk of dying from a fatal crash for the third month in a row. The data reveals that the fatality rate per miles driven in May 2020 increased 23.5 percent compared to May 2019, despite fewer cars on the road. Overall, the mileage death rate per 100 million vehicle miles driven was 1.47 in May compared to 1.19 in 2019.
How Did That Happen?
One explanation is how fewer cars on the road can create a false sense of security. Drivers may feel more comfortable speeding, texting, or engaging in other risky behaviors behind the wheel with the more open roads caused by COVID-19 quarantines.
In our past writings, the Michigan State Police have shared with Automoblog that serious crashes often happen on bright, sunny days when visibility is excellent. These clear, sunny days may lead to “zoning out,” especially if a particular road is familiar. This autopilot-like behavior means drivers are less likely to notice their speed or other road users – and their risk of an accident increases considerably as a result.
With fewer cars on the road during a quarantine, it’s easy to see how drivers may operate on autopilot, whether intentional or not.
The sustained periods of lower accidents and claims Lee and Ruiz refer to might be further complicated as we move through the remainder of 2020. A study earlier this year from Agero shows that daily traffic levels are rebounding. Agero, a roadside services company, analyzed data on vehicle breakdowns as the basis for their study. After doing so, Agero determined daily breakdown averages are growing at a weekly rate over four times faster than the same period in 2019.
Before COVID-19, motor vehicle deaths have held around 40,000 since 2016, according to the National Safety Council. After a hard look at the data, it seems unlikely COVID-19 will cause auto insurance rates to drop. Whether our roads are less traveled during a quarantine, or packed during a typical rush hour, the data shows we, as a society, are dangerous behind the wheel. If we want to drop our auto insurance rates, we need to reduce the number of accidents on our roadways.
“I don’t think the COVID-19 pandemic changed the auto insurance world as much as people want to think it did,” Lee said. “The good news is, as long as you’re still paying, nothing will change as far as your coverage and claims process goes; otherwise, nothing has really changed other than some premium relief.”
There are some age-old things we can do to lower our auto insurance premiums, pandemic or not. Here is a helpful list.
1: Examine Your Driving Habits
If you are driving fewer miles than usual, that might have an impact on your premium. Lajdziak says if you are still working from home, it’s worth looking at how your vehicle usage has declined.
“Consumers should pay close attention to their driving habits, if that has significantly changed, and if they expect that change to remain for the longterm,” he said. “That may mean significantly less miles than before, which could lead to lower rates if the consumer was previously a high-mileage driver. In that case, contacting your insurer and adjusting the miles you typically drive can have an impact on premiums.”
Drivers can also ask their auto insurance provider about usage-based plans. These plans monitor driving habits and vehicle usage by way of telematics devices. Examples of these programs include Progressive Snapshot, Allstate Drivewise, and Nationwide SmartRide. According to The Zebra, participation in these and other similar programs are free, as well as the accompanying telematics device.
“Available through most carriers, usage-based plans can offer somewhat real-time relief to those driving less or driving safer,” Lajdziak said. “Interest in such programs has increased as a result of COVID-19, given consumers still expect to be driving less in the future, whether to remain working at home or simply because they want to spend less time in public.”
According to Estes, State Farm’s Drive Safe & Save program yields an average discount between 10 and 15 percent and possibly higher depending on actual miles driven.
Ruiz cautions that while driving less can work in your favor; it’s not a universal guarantee. “Just because a customer’s mileage decreases doesn’t mean other risk factors disappear,” she said. “Numerous factors determine a driver’s auto insurance premium, including claims and credit history, years of driving experience, and marital status.”
2: Ask About Discounts
The most common discounts include safe driver, good student, military service, customer loyalty, and the number of safety features on your vehicle. According to NerdWallet, there is no single provider with “the best” discounts. Instead, jump on the phone and ask your provider about discounts if you haven’t lately. If you have a clean driving record, a long history with the company, or are regularly acing your exams, let them know.
“Consumers can and should re-examine what discounts they may be eligible for now that they were not when they originally purchased their policy,” Lajdziak explained. “Every insurer offers discounts, but they are often only presented to consumers when they purchase the policy.”
If you have watched TV or listened to the radio sometime in the last century, you have probably heard an ad about savings via bundling. Well, those ads are right, according to Ruiz. “Customers should contact their insurance professional to discuss potential auto policy discounts, which can be achieved by bundling home and auto coverage with the same insurer,” she said.
#3: You Are What You Drive
What you drive will determine your insurance rate. You will shell out more for a sleek, fast convertible versus a casual sedan. If you are vehicle shopping right now and want to lower your insurance rate, it’s worth researching makes and models that have a good track record in this area.
“When it comes to what you drive, nothing has changed very much, even with COVID-19,” Lee said. “If you want to drive a sports car, you’re still going to pay a lot to insure it.”
4: Be Sober & Stay Alert
Your driving history plays a role when it comes to auto insurance premiums. If you are a genuinely reckless driver, you may be required to carry SR-22 documentation, even if you don’t own a car.
In Automoblog’s past work with the Michigan State Police and the California Highway Patrol, three main things put motorists at risk: speed, distraction, and impairment. Concerning the latter, prescription drugs are also problematic, even though we don’t realize it. When the labels recommend not operating heavy machinery, we tend to think of construction and factory equipment. Still, we should extend that definition to include our automobiles.
Drive slower, put the phone away, and designate a sober driver. Doing so will have benefits well beyond a lower car insurance rate.
5: Don’t Cancel Your Coverage
While it might be tempting, driving less isn’t justification for canceling your auto insurance. If you are pulled over without proof of insurance or get in an accident, you could find yourself in a world of trouble. Lee recommends calling your provider and being honest with them if you are having trouble paying your premiums.
“You can also look at dropping coverages you maybe don’t need at the moment,” she added. “You will save a lot of money by dropping to liability only, for example.”
“We recognize that this can be a tough time for many people across the country,” Estes added. “Agents are a great resource for customers and can you help review things like coverages and deductibles, and that you’re receiving discounts that may apply to you. Many agent offices are still running virtually and can assist customers via phone or email.”
Bonus Tip: Always Shop Around
Our team has reviewed and evaluated some of the nation’s top auto insurance providers. We conducted individual reviews and then compiled a list of the 10 best car insurance companies right now. If you are looking at a specific provider, please consult one of the guides below to help you in your decision-making process.
- Geico: Based on our research, Geico is the best auto insurance provider overall.
- Farmers: Many available discounts, good plans for those with low credit scores.
- AAA: Best membership perks, good customer service, roadside assistance included.
- Progressive: Good usage-based plans, simple quote process and online experience.
- Liberty Mutual: Good plans for new drivers.
- State Farm: Ideal for students and young drivers.
- The General: Best for high-risk drivers, easy quote process.
Carl Anthony is Managing Editor of Automoblog and a member of the Midwest Automotive Media Association and the Society of Automotive Historians. He serves on the board of directors for the Ally Jolie Baldwin Foundation, is a past president of Detroit Working Writers, and a loyal Detroit Lions fan.