Auto Insurers Reaped Nearly $30 Billion Pandemic Windfall Profit in 2020 as State Insurance Regulators Fail to Protect Consumers · Consumer Federation of America

Washington, D.C. – Insurers selling personal car indemnity reaped boom profits of at least $ 29 billion in 2020 as miles drive, vehicle crashes and car insurance claims dropped because of the pandemic and refer government actions. Analyzing insurers ’ 2020 premium and claims results – and the specify “ premium easing ” offered by insurers – the Consumer Federation of America ( CFA ) and Center for Economic Justice ( CEJ ) show that insurers collected $ 42 billion in overindulgence premiums while providing lone $ 13 billion in “ premium relief. ” [ 1 ] alternatively of returning the COVID windfall to consumers, insurers increased payouts to senior management and stockholders .
State-by-state required extra car indemnity pandemic relief is itemized in mesa 2 attached to this passing .
Despite analyses and warnings from CFA and CEJ starting in March 2020, when it was clean that the decrease in drive had made then-current indemnity prices excessive – and in trespass of the law in about every state – the huge majority of indemnity regulators took no military action to compel insurers to return the illegal profits. Relying on insurers ’ fiscal statement data for premiums and losses and extra analysis by A.M. Best regarding insurers ’ “ premium relief, ” CFA and CEJ show insurers should have returned $ 42 billion of agio overcharges to consumers, but actually returned just one-third of that amount .
“ In about every state, car policy premiums – by law – can not be excessive. The inability or unwillingness of about all department of state insurance regulators to enforce the law and protect consumers raises good questions, ” said J. Robert Hunter, CFA ’ s Director of Insurance. “ As we pointed out in letter after letter to insurance regulators throughout 2020, it was crystal clear that insurers ’ premium relief was deplorably inadequate. The affiliated document lists, with links and thumbnail descriptions, all of the letters and crusade releases we issued urging states to take natural process to reduce illegally excessive car premiums in their jurisdictions. ”

According to the insurers ’ fiscal reports reviewed by CFA and CEJ, between 2016 and 2019, car insurers paid 67.4 cents of every premium dollar for claims. The remaining 32.6 cents – plus investment income earned from holding policyholders ’ money – covered insurance company expenses and profit. In 2020, the come spent on claims dropped to 56.1 cents per dollar of full premium reported. entire agio of $ 250.6 billion reported by insurers is net of $ 7.9 billion in premium relief accounted for by some insurers as a reduction in premium .
postpone 1 shows that from 2016 through 2019, insurers paid 67.4 cents of every premium dollar for claims. But title payouts in 2020 were just 56.1 cents per web premium dollar – or $ 33.6 billion less than if insurers had continued to pay 67.4 cents in claims per dollar in premium. To provide some perspective, a reduction in title payments of $ 33.6 billion is a per-vehicle reduction in claims of about $ 150 .
table 1 shows that the $ 33.6 billion reduction in claim payouts by insurers translates into $ 42.1 billion of overindulgence premium charges out of a sum of about $ 258.6 billion in total personal car indemnity premium. [ 2 ] yet, according to A.M. Best, insurers returned equitable $ 13 billion in premium relief [ 3 ] – less than one-third of their pandemic boom – while pocketing the remaining two-thirds. As a result, insurers shortchanged policyholders by an average of over $ 125 bounty per insured vehicle .

State Insurance Commissioners Have Statutory Responsibility to Protect Consumers from Excessive Auto Insurance Premiums – But Most Failed to Act

  As a consequence of the sudden change in exposure covered by car indemnity, premiums became excessive about overnight in mid-march 2020. however, most regulators did not take – and have hush not taken — natural process to require the necessary bounty stand-in from car insurers. table 2 shows the extra bounty relief needed in each state. [ 4 ]
In April and May of 2020, most of the nation ’ s large insurers did provide refunds or credits to consumers in reaction to the pandemic, but identical little of the surfeit bounty was given back after death spring and our research showed that even this two-month vengeance to policyholders was alone about half of what should have been refunded. [ 5 ]
California, Michigan, New Jersey, and New Mexico were the only states to require premium refunds during the give of 2020. But only California continued requiring refunds beyond the first few months of the pandemic. In March 2021, California ’ s Insurance Commissioner Ricardo Lara determined that car insurers calm overcharged California drivers during the pandemic and ordered them to return extra bounty to consumers. In June and July, respectively, Washington State and New Mexico announced industry data calls about car indemnity losses during the pandemic that will hopefully lead to extra agio refunds for consumers, but early regulators have not taken initial steps, let entirely foster steps, to recoup money for drivers by enforcing their states ’ laws against excessive rates..
In summation to little or no legal action by most states, there has been no action at the National Association of Insurance Commissioners ( NAIC ) to examine the issue of car insurers ’ pandemic windfall profits, to collect data during 2020 to monitor the position or to develop guidance for states to bring necessitate respite to consumers – again despite repeated calls by CFA and CEJ .
As the NAIC conducts its national meeting this week, CFA and CEJ call on state insurance regulators to take action to address the $30 billion overcharge to auto insurance consumers. This news dismissal has been sent to the President and other peak officials of the NAIC urging them to act immediately to begin the process of returning pandemic premium overcharges to customers .


March 18, 2020 letter to Commissioners : “ We write to urge you to direct car insurers in your submit to provide agio cancel payments to policyholders whose drive has been affected by COVID-19. ” hypertext transfer protocol : //
March 30, 2020 letter to Commissioners : “ We urge you to take legal action on key P & C indemnity consumer protection issues arising from COVID-19 and federal and local politics responses to the pandemic, peculiarly the excessive premiums being charged to individuals and businesses for lines of policy that base rates on factors such as miles drive, payroll, and receipts. ” hypertext transfer protocol : //
April 6, 2020 Press Release : After praising Allstate and American Family for their shelter-in-place paybacks, “ The groups noted that they had sent a letter to state policy commissioners on March 18 urging the regulators to act to get diligence broad premium easing for car policy consumers – and have seen virtually no action to date other than suggestions to insurers by the insurance commissioners in Alaska and Pennsylvania. hypertext transfer protocol : //
April 13, 2020 Press Release : Issued a Report Card on insurance company actions in granting paybacks due to COVID. The release said : “ Given that hundreds of millions of Americans pay for car insurance and spend more on car policy than any other type of policy early than health indemnity – $ 250 billion in 2019 – we are puzzled by the miss of activity to date by policy commissioners. ” “ There is still a want for the regulators to step up, as critical steering for stream and future relief is needed, ” said CEJ ’ s Birny Birnbaum, Executive Director of the Center for Economic Justice. hypertext transfer protocol : //
April 23, 2020 Press Release updating the vengeance position. “ For those insurers providing bounty relief, the relief ranges from merely over 10 % to 35 % of two months premium with the huge majority of insurers providing only 15 %. With some data showing drive vehicle accidents down 50 % or more, more relief is needed for March, April and May from closely all insurers, ” said Douglas Heller, CFA ’ randomness Insurance Expert. “ It ’ second clear that agio stand-in of 30 % or more will be needed for these months. ” But we besides pointed out the bankruptcy of state regulators to act. hypertext transfer protocol : //

On May 7, 2020, CFA and CEJ issued a letter to all Commissioners, “ Auto Insurance Premiums are Excessive in Your State. ” The letter stated, “ Consumer Federation of America and the Center for Economic Justice just released a major report card detailing the current situation in car insurance in America and the fact that, throughout every state in the area, consumers are still paying excessive premiums even after the late volunteer relief granted by most car policy companies. ” hypertext transfer protocol : // The report attached to the letter, “ Personal Auto Insurance Premium Relief in the COVID-19 Era ” made clean that “ State policy regulators have largely been absent from personal car policy relief and the state car insurance regulative system has proven to be unprepared for an consequence like COVID- 19…Motor vehicle accident data indicate a minimal average 30 % premium relief payment starting March 18, 2020 through the end of May, even after accounting for offsetting monetary value factors. ”   hypertext transfer protocol : //
On May 21, 2020, we sent a letter to all Commissioners, “ More State Action Needed to Address Excessive Auto Insurance rates. In it we pointed out that “ other than the commissioners in California and New Jersey, no other submit regulators have ordered insurers to provide any relief, let alone a minimum measure of relief… Whatever the cause of this regulative inaction to date, consumers need – and your statutory duties demand – carry through now. ” hypertext transfer protocol : //
On May 26, 2020, our Press Release stated, “ While commissioners in California and New Jersey have ordered bounty relief and are collecting data to ensure respite is adequate, most state indemnity regulators have done nothing to secure car policy premium relief, even as they have much inappropriately taken credit for insurers ’ actions. The inaction by state indemnity regulators has peculiarly harmed those low-income and minority consumers forced to purchase policy from alleged “ non-standard ” carriers. ” hypertext transfer protocol : //
In a June 25, 2020 letter to all Commissioners we said, “ Our review of company announcements indicates that many insurers who offered premium easing for April and May are not continuing to offer relief for June and beyond – despite the reduction in miles driven and crashes from the levels assumed for rates in effect on March 1. It is no less pressing for you to take action now as it was in mid-march to meet your statutory requirements to ensure consumers do not pay excessive premiums. ” hypertext transfer protocol : //
On July 15, 2020 we specifically called on Arizona and Texas to extend the paybacks beyond the insurance company ’ second voluntary paybacks of April and May 2020. hypertext transfer protocol : // hypertext transfer protocol : //
On August 6, 2020, we issued a Press Release, “ Consumers still Being Overcharged for Auto Insurance as Pandemic Continues to Reduce Claims. ” We said, “ While a couple of states took natural process to order premium easing, most state indemnity commissioners took no action. As predict, car insurers are now reporting boom profits. ” hypertext transfer protocol : //
On August 11, 2020 our Press Release pointed out that GEICO was pocketing boom car insurance profits on billions of dollars from COVID. We said, “ According to CFA and CEJ, state indemnity commissioners need to do more to ensure that car insurers return more of their surfeit income to their policyholders and former customers. At this time California, New Mexico, Michigan and New Jersey are the entirely states requiring car insurers to return pandemic-driven overindulgence premium to customers. ” hypertext transfer protocol : //
On September 21, 2020, we again wrote to all Commissioners in which we said : “ The pandemic has shown once again how systemic racism permeates personal car indemnity and penalizes minority consumers. Millions of Americans are presently struggling and facing economic hardship, whether due to unemployment, reduced hours and wages, business closures, or a decline in business activeness. This makes it all the more significant that you ensure that the policy companies you monitor and regulate are returning consumers ’ overindulgence agio on an ongoing footing. ” hypertext transfer protocol : //
September 22, 2020 Press Release subtitled, “ insurance Commissioners are Asleep at the Wheel When It Comes to Putting this Money Back in Consumer Pocketbooks Where It Belongs. ” hypertext transfer protocol : //
December 22, 2020 letter to all Commissioners, “ extremely senior high school Insurer Profits and New Accident Data Show that Auto Insurance Companies Need to Provide More Pandemic Refunds ; Your Constituents are Suffering by Your Inaction. ” We stated : “ With the economic trouble that has accompanied this pandemic, the fact that most insurance Commissioners allowed insurers to set the terms for refunds and have not ordered more has been a failure of leadership. But action on behalf of consumers today is still much better than none at all. ” hypertext transfer protocol : //
March 11, 2021 Press Release, “ California Insurance Department Ends Auto Insurers ’ COVID Windfall Profits ; Consumer Groups Ask Why other States Don ’ deoxythymidine monophosphate Keep Insurance Companies from Raiding Consumer Pocketbooks with their Windfall COVID Profits. ” “ Consumers trust on their submit indemnity commissioners to protect them from being ripped off by insurers, but most have let car insurers collect massive windfall profits, while the millions of Americans struggled through the pandemic, ” said CEJ Executive Director Birny Birnbaum. hypertext transfer protocol : //
[ 1 ] See table 1 for psychoanalysis, methodology and data sources. The “ premium stand-in ” amounts come from the insurance company evaluation agency A.M. Best in an April 20, 2021 report. A.M. Best compiled the “ premium easing ” from statutory fiscal statements in which insurers self-reported the total of “ agio relief. ” The $ 13 billion of “ agio relief ” reported by A.M. Best includes $ 3 billion in claimed “ agio respite ” from GEICO. In fact, GEICO never paid any premium relief to existing policyholders. Rather, GEICO promised a 15 % reduction upon reclamation and even to raw customers – an action which just reflected lower expected claims in the future. GEICO never provided premium relief to consumers who paid agio for March, April or May 2020. In contrast, State Farm provided actual bounty relief though policyholder dividends to offset premiums paid by policyholders in March, April and May, 2020. State Farm besides filed a prospective rate reduction in expectation of lower claims in the future which averaged nationally was 11 %. Despite GEICO not providing any premium easing, we included all the amounts reported in the A.M. Best analysis, including GEICO .
[ 2 ] The $ 250.626 Billion in reported earned premium after premium relief plus $ 7.949 Billion in agio stand-in treated by insurers as a reduction in premium equals $ 258.575 Billion
[ 3 ] A share of the $ 13 billion in refunds was provided to policyholders with coverage other than personal car insurance, but Best ’ s does not break out the refunds by line, so our calculation probable overstates the personal car premium relief provided by insurers and understates the extra easing due for policyholders.

[ 4 ] By using industry aggregate expense provisions across all states, the CFA / CEJ estimate of extra premium stand-in needed is, again, bourgeois. In a submit with expense efficiency requirements for car indemnity rates, such as California, the extra premium stand-in needed would be significantly higher than indicated in table 2. consequently, the extra premium easing needed for California is much greater than the $ 3.5 Billion indicated in table 2 .
[ 5 ] “ Personal Auto Insurance Premium Relief in the COVID-19 era : A composition By the Center for Economic Justice and the Consumer Federation of America. ” Center for Economic Justice and Consumer Federation of America. May 2020. available at hypertext transfer protocol : // .
Robert Hunter, CFA, 703-528-0062
Birny Birnbaum, CEJ, 512-912-1327
Michael DeLong, CFA, 925-708-1135

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