Auto insurers shortchange drivers on COVID exemption, says consumer group: NPR

A school bus drives down the street on the first day of school reopening in the Brooklyn borough of New York City on December 7, 2020.

Angela Weiss / AFP via Getty Images

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Angela Weiss / AFP via Getty Images

A school bus drives down the street on the first day of school reopening in the Brooklyn borough of New York City on December 7, 2020.

Angela Weiss / AFP via Getty Images

If you had auto insurance during the pandemic, you may receive a refund from your insurance company.

According to two consumer groups, you got shortchanged.

The Consumer Federation of America and the Center for Economic Justice estimate that the auto insurance industry generated nearly $30 billion in revenue that should have gone back to policyholders while driving slow last year.

An analysis released by the groups last month found that auto insurers made $42 billion in “extra premiums” in 2020, but provided only $13 billion in relief to drivers.

“In nearly every state, auto insurance premiums — by law — cannot be exorbitant,” said J. Robert Hunter, insurance director for the Consumer Federation of America. “The inability or unwillingness of nearly all state insurance regulators to enforce the law and protect consumers raises serious questions.”

As pressure mounts on insurers over whether or not the payments were adequate, a major trade association for auto insurers called the analysis “wrong on everything.”

Overcharge amount $125 per vehicle

When people were told to stay home in the early days of the COVID-19 pandemic last year, driving suddenly came to a halt for many.

Fewer cars on the road meant fewer accidents and less money needed to pay insurance claims.

In response, auto insurers refunded some of the money drivers had spent on their policies and 15-25% of premium payments to policyholders, according to the AARP.

But consumer advocacy groups now say that was not enough.

According to a CFA/CEJ analysis, drivers should have gotten an additional $125 back for each insured vehicle last year.

The groups said state-level insurance regulators have not done enough to ensure that auto insurers are returning premiums to drivers in sufficient amounts and not overcharging them.

Trade group says insurance companies did nothing wrong

But the American Property Casualty Insurance Association, a leading trade group for insurers, said the analysis of consumer groups is flawed.

The association said that what advocates call “profits” is mostly “money used to handle claims, sell and service policies and pay taxes and regulatory fees.”

According to the APCIA, auto insurance company profits are less than 2 cents for every premium dollar.

The association also said that driving conditions have changed since the early days of the pandemic in the spring of 2020.

According to the APCIA, miles driven have returned to pre-pandemic levels and accelerating speeds have made accidents more severe.

“If unreasonable premium deductions had been ordered last year, there would have been additional pressure on rates this year, as there is a faster increase in miles and a higher rate of accidents and damages,” said David Snyder, APCIA vice president, international. lawyer, in a statement.

“[The consumer groups’] Unreasonable exemption demands are unfounded and potentially dangerous to the financial health and competitiveness of the insurance system.”

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