The best kind of financial help is the kind that you don’t have to ask for.
On Monday, Allstate and American Family Insurance said they would give their personal auto insurance customers a break, since most of them aren’t driving as much as they did a month or two ago.
The savings don’t amount to a lot. Allstate will give most customers 15% of their monthly premium back in April and May, via a credit to their bank account, credit card or Allstate account. American Family will send auto insurance customers $50 for each vehicle on their policies.
But the nature of the action is exemplary — and rare — given the context of a pandemic. People are sick, and many more are struggling. Nobody wants to have to think to call their auto insurer, let alone wait out the call-center deluge afflicting most financial services companies.
Auto insurance companies are in an advantageous position in the quest to eke out a public relations win in these grim times. If people drive less, they crash less. Fewer crashes mean fewer claims. And fewer claims means more premium money sitting around on an insurer’s books. (Regulators in all the states where Allstate and American Family do business generally have to approve their plans to return customers’ cash, but they expect to start sending their refunds soon.)
“We know there’s been a significant reduction in miles driven and claims filed for personal vehicles since the pandemic began limiting people’s activity,” American Family wrote in an FAQ on the repayments. “We are not seeing similar claim trends in our other lines of insurance, such as homeowners where filed claims are increasing, likely from people staying home more, resulting in more accidents.”
Allstate and American Family’s relative largesse does raise a question though: Just how good have the stay-at-home orders been for auto insurers’ bottom lines?
Allstate’s chief executive, Thomas J. Wilson, said the company was acting on relatively little information right now. But what it has gathered was eye-opening. “After one week’s worth of data came in, we knew this was significant,” he told me. “And it was less than two weeks from when we first saw the data to when we made this announcement.”
Wilson said that driving to work was usually about one-third of people’s total miles on the road. But there are many unknowns insurers are still facing as a result of the stay-in-place orders, he said.
The people who are still driving are driving faster, based on Allstate’s data. Will they crash more and do more damage when they do have a wreck? How long will the pandemic last? When it ends, will everyone still want to — and get to — work from home twice a week?
Wilson said he would not know how profitable Allstate’s auto insurance operation would be without answering all those questions and more.
American Family threw up its hands in similar confusion. “We’re returning to our customers estimated savings based on our best determination of what we know now,” a company spokesman, Ken Muth, said in an email. “We’ll continue to focus on aligning what we charge in premium to the expected costs associated with providing the insurance coverage, which is primarily paying out claims.”
Doug Heller, an insurance expert with the Consumer of Federation of America, saw all of this coming a few weeks ago. The organization published a letter asking insurance companies to adjust their premiums in anticipation of a likely fall in claims. And his colleague Micah Hauptman has urged customers to call their insurers and ask for a better deal.
Heller said in an interview that he was surprised at the two insurance companies’ decisions, since there hadn’t been much pressure on them. He said that probably would have changed, though, because state insurance regulators usually keep an eye out for excessive rates.
“They’re collecting all this premium and aren’t seeing accidents or claims, so they have a choice,” Heller said. “They either start giving back money or have to explain their coronavirus windfall at some point.”
On Monday, I made like a regulator and went to nine other auto insurance companies and asked them whether they intended to match Allstate and American Family.
So far, nobody is, but a couple sound close. A Progressive spokesman said that the company was “exploring how to best return some premium to customers” and that it expected to have those plans in place “soon.” And State Farm said its officials were “closely monitoring our automobile insurance loss trends and are considering how best to take this into account and return value to our auto insurance policyholders. We expect a decision in this regard by the end of the week.” USAA said: “We are exploring options to continue serving our members well during this difficult time. We’ll share more in the coming days.”
Others were vague. A Liberty Mutual spokesman said the company was “continually evaluating ways that we can support our customers.” And from Nationwide: “We continue to evaluate all of our options.” Travelers said: “We are working with our customers and their agents to address their changing circumstances and continue to consider a number of programs to support them further in this rapidly evolving situation.”
Others did not immediately answer my questions on Monday: Farmers, Geico and Chubb.