Coronavirus-Driven Car Insurance Discounts Fall Short

| Oct 28, 2020 | Insurance Defense

In the wake of the coronavirus pandemic, shelter at home orders and shuttering businesses resulted in fewer drivers on the road. In response to that unprecedented trend, many high-profile auto insurance companies offered discounts that reflected drivers’ reduced time behind the wheel.

Six lawsuits against several national insurance companies – Allstate, Geico, American Family Insurance, Progressive, Erie Insurance, and Travelers – claim financial relief was not “fair and appropriate.” Instead, discounts fell woefully short based on a nationwide pandemic that reduced the number of vehicles on the road.

Savings Not Reflective of the Times

The plaintiffs believe that staying home instead of driving during the COVID-19 outbreak reduced claims filed to the insurers. That decrease should have resulted in a more significant reduction in premiums. Instead, the defendants “unfairly profited” off the higher rates.

They cite State Farm, spared from legal action, as the best example of an insurer that provided cost reductions reflecting the events at the time. They offered their customers a 25 percent cost reduction from March 20 to May 31, totaling $2 billion in credits. The plaintiffs believe that the discount falls more in line with an actuarial analysis that reveals two-thirds of people staying off the roads for most of the spring.

While all the lawsuits were filed in Cook County, Illinois, legal counsel is pursuing class-action status for every state resident. That strategy could likely plant seeds nationwide that may add more plaintiffs/auto insurance policyholders in Pennsylvania and states throughout the country.