American Family Insurance said it will give back about $50 per car that a household has insured with the company via a one-time payment. It said that will total about $200 million.
Allstate and American Family also said their customers who are having financial problems because of a loss of income can delay payments on insurance premiums without penalty if they contact the companies.
Both are also expanding insurance coverage for customers who use their personal vehicles to deliver food, medicine and other goods. Standard personal auto insurance policies typically exclude coverage that is used for a customer’s car.
And Allstate says it is also offering anyone in the United States, whether or not they are an Allstate customer, free identity protection for the rest of the year “since our lives have become more digital.”
But Allstate is probably giving back only a fraction of the money it is likely to save from reduced insurance claims during the crisis said Dan Karr, the CEO of ValChoice, a data analytics company that acts as a watchdog on the insurance industry.
Figures reported by Allstate to state insurance regulators show it pays out a little more than $1 billion a month in auto insurance claims, he said. Karr’s modeling suggests that those claims are likely falling by about 85% due to the reduced number of accidents.
“I think it’s great what Allstate did. But where’s the rest of savings?” Karr told CNN Business. He said American Family Insurance’s refund will probably equal even less of the average premium than Allstate’s target of a 15% reduction.
It’s too soon to know exactly how far claims will decline because of the drop in driving, said Allstate spokesman Justin Herndon. He said the company may give additional payments to customers as it gets more data on claims.
“We decided to act quickly to put our customers first. This is something we’ll keep looking at,” he said.
Karr said he wouldn’t be surprised to see other insurers follow Allstate’s lead.
Industry leader State Farm, which is a mutual insurance company owned by customers, is “closely monitoring our automobile insurance losses and are considering how best to take this into account and return value to our auto insurance policyholders,” according to a statement from the company.
It said it expects a decision by the end of the week. Progressive said it is “exploring how to best return some premium to customers to reflect the decreased exposure that comes with less frequent driving during the pandemic and expect to have those plans in place soon.” Spokespeople with Geico, owned by Berkshire Hathaway, did not immediately respond to a request for comment on their plans.
An 85% drop in the number of accidents is a conservative estimate, Karr said. He said that data confirms that is the percentage of accidents that happens during periods of heavy traffic, which are almost completely absent in areas with stay-at-home orders.
Auto insurance companies will probably continue to benefit from reduced driving even after stay-at-home orders are lifted in some states, he said, noting a large number of people will continue to work from home either full or part-time. Others will continue to be out of work because their employer went out of business during the crisis. Workers driving or riding in cars to and from work makes up for about 28% of miles driven by vehicles in a normal time, according to the Federal Highway Administration.
“Data shows accident rates go up exponentially as traffic increases, and even a 5% reduction in traffic will make a difference,” he said. “Even people who are still driving because they are essential workers, the accidents rates will be way down.”
For those whose insurers are not offering money back, Karr said those customers should call their insurer and change the coverage on the vehicle from use for work to personal use, assuming they are staying home. That will produce savings as well. But they should be sure to change it back to commuting use once they are using the car to get to and from work once again.