Leading auto insurers are giving money back to their policyholders as the Covid-19 shutdowns lead to a drop in auto claims, warning of potential tough times ahead for the industry.
In the wake of the Covid-19 pandemic, people have cut back significantly on driving, resulting in fewer accidents and fewer losses for insurers.
As a result, auto insurers have pledged to give around $10B back to policyholders in recent weeks.
While this will buy some goodwill with customers, the main motivation is likely driven by regulatory pressures to protect consumers due to the reduced risk inherent in this environment. For example, California has already mandated paybacks for auto insurers.
Allstate estimates its customers have driven up to 50% less during the pandemic, and accidents have fallen as much as 75% in some areas. Most of these refunds to policyholders hover around 15 – 20% of total premium.