• Market Crumbs

Auto Insurers Pressured


Image via Ricardo Gomez Angel on Unsplash

With Americans confined to their homes as a result of the coronavirus, there's obviously been a decline in the amount of driving compared to normal times. Auto insurer Allstate says its data showed driving mileage declined between 35% and 40% during the last three weeks of March.


The decline in driving has resulted in a variety of positive outcomes. For example, California has seen a 50% decline in traffic accidents. Colorado observed a decline in air pollution, with a decline in driving cited as one of the factors. Florida Highway Patrol also saw a decline in accidents, as well as DUIs, even though more people are speeding as a result of empty highways.


Despite most people's cars being idle and the risks of being on the road having significantly diminished, only a couple of auto insurers have given their customers a refund on their premiums.


Allstate and American Family Insurance each announced they would put some money back into their customers' pockets. Allstate will give most customers 15% of their monthly premium back for April and May via a credit to their bank account or credit card. American Family Insurance will give customers $50 for each vehicle on their policy. The move results in a total of about $800 million returned to customers, $600 million from Allstate and $200 million from American Family Insurance.


"We are doing this because it is the right thing to do for our customers. As a result of the COVID-19 pandemic, customers are staying at home to care for themselves and their loved ones, driving less and filing fewer claims. Because of these factors, we are returning premium to them," American Family Insurance said.


The Consumer Federation of America even wrote a letter last month requesting auto insurers to adjust the premiums consumers pay as a result of an expected decline in claims.


"They’re collecting all this premium and aren’t seeing accidents or claims, so they have a choice," said Doug Heller, an insurance expert at the Consumer Federation of America. "They either start giving back money or have to explain their coronavirus windfall at some point."


Heller believes the decline in driving, and subsequent drop in claims, is adding up to about $2 billion per month in "excessive profits" for auto insurers.


A New York Times journalist reached out to a handful of the largest auto insurers to see if they would also reimburse customers, with the responses ranging from they're looking into it to no response at all.


Progressive said the company is "exploring how to best return some premium to customers," while State Farm said they are "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," with a decision by the end of the week. USAA said "We are exploring options to continue serving our members well during this difficult time," and that they'll share more in the coming days.


Liberty Mutual, Travelers and Nationwide were "vague," while Farmers, Geico and Chubb didn't respond.


At a time when unemployment is skyrocketing, the least these companies can do is follow in the footsteps of Allstate and American Family Insurance and give money back to their customers when many need it most.


Leftover Crumbs

  • We'll see you in court. WeWork is suing SoftBank for withdrawing its $3 billion tender offer, alleging SoftBank breached its obligations under the agreement. WeWork's lawsuit is aimed at requiring SoftBank to follow through with the purchase or pay damages. "SoftBank has already received most of the benefits provided to it under the MTA [Master Transaction Agreement], including broad control of WeWork and additional economic benefits," WeWork said. "SoftBank’s wrongful conduct in failing to consummate the tender offer deprives WeWork’s minority stockholders of the liquidity that they were promised."

  • Mortgage relief needed. Mortgage forbearance requests have surged in the latest sign of the coronavirus' effect on the U.S. economy. Forbearance requests jumped 1,270% between March 2 and 16, while jumping 1,896% between March 16 and 30, according to the Mortgage Bankers Association. It's also getting more difficult to get through to mortgage companies. Call center average speed to answer increased to 17.5 minutes from under 2 minutes three weeks ago, while 25% of borrowers are abandoning calls versus 5% three weeks ago.

  • More drive-thru testing. Walgreen's is following in the footsteps of CVS and expanding the number of drive-thru testing locations for COVID-19 by 15. The sites will be in Arizona, Florida, Illinois, Kentucky, Louisiana, Tennessee and Texas, and will be open later this week. "We’re continuing to do everything we can, both with our own resources and also by partnering with others, to serve as an access point within the community for COVID-19 testing," Walgreen's President Richard Ashworth said.

  • Freedom of speech. Facebook's WhatsApp messaging service is limiting forwarded messages to one chat at a time to slow the spread of misinformation about medical advice relating to the coronavirus. WhatsApp, which has more than 2 billion users, said the move will be in place indefinitely. "We believe it’s important to slow the spread of these messages down to keep WhatsApp a place for personal conversation," WhatsApp said in a statement.

  • Amazon isn't playing around. Amazon has reportedly warned warehouse employees they could be fired for not practicing social distancing. A first offense would result in a written warning, while a second offense could result in termination. "We are taking intense measures to ensure the health and safety of employees across our sites who are performing an essential role for their communities during this crisis," Amazon said.