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Tuesday, 06 October 2020 21:45

Auto Insurers' Refund Responses During First COVID-19 Wave

Written by Chris McFadin, PropertyCasualty360
This list shows how the 10 biggest auto insurance companies brought premium relief to their policyholders this past spring. This list shows how the 10 biggest auto insurance companies brought premium relief to their policyholders this past spring. Shutterstock

Index

The first reason has to do with corporate governance. Mutual insurance companies are literally owned by their customers. This means when a mutual company has an enormous surplus in profit, it has to return the money to its owners in the form of lower premiums, dividends or some other discount.

 

The second reason has to do with competitive pressure. All the companies implemented their premium relief programs within a few days of each other in early April. Allstate, USAA and American Family were the first movers on Monday, April 6. By the end of the week, each of the top 10 auto insurance companies in the country had followed suit.

 

As soon as the first few companies started publishing their press releases, the others no doubt felt pressured to follow suit. The free market, therefore, worked in favor of bringing lower prices to customers at both mutual and stock companies.

 

Another interesting way to view this list is to consider how the companies positioned the refund. Insurance can be expensive. So did companies discount premiums moving forward? Or did they refund policies currently on the books? Did they give back a percentage of premiums, or did they give the same amount back to every policy owner, like Nationwide? And did they issue an immediate and specific refund through a physical check to policyholders so that nobody would miss the free money, like American Family?

 

It remains to be seen how these companies will respond if the U.S. economy enters the second period of widespread lockdowns and shelter-in-place orders. However, the ways in which the companies responded to the first wave should help insurer manage customers’ expectations in what might be coming this fall.

 

Chris McFadin is a writer for HowMuch.net, a website specializing in topics such as insurance, business and the economy. Chris lives in Milwaukee, WI.

 

We thank PropertyCasualty360 for reprint permission.


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