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Most state insurance commissioners fail to prevent windfall profits by auto insurers due to fewer pandemic claims

Car Wreck on Tow Truck-831928_1920State insurance commissioners are failing to prevent windfall auto insurer profits as auto claims dropped when driving and auto crashes declined due to the coronavirus pandemic, the Consumer Federation of America and the Center for Economic Justice said.

In a letter to state insurance commissioners, the groups labeled the excuses of some regulators for failing to protect consumers as “pathetic.”

“The facts make clear that the inaction by most state Insurance Commissioners to assure refunds are adequate has lined the auto insurers’ pockets at the expense of American consumers,” said Bob Hunter, director of insurance for CFA.

Hunter said insurance commissioners, who are charged with ensuring rates aren’t excessive, need to direct insurers to provide the appropriate premium relief from mid-March to the present, and this need continues.

“Consumers will require premium relief into the future as long as the pandemic depresses vehicle miles traveled and accident claims,” he said.

CFA and CEJ have collected and analyzed crash data from Texas and Massachusetts over the past nine months, and provided updates in several letters to commissioners urging givebacks for consumers because of the covid-19 pandemic and its impact on driving.

The most recent statistics from July 2020 show that crashes remain between 14 percent and 20 percent below their 2019 level in Texas, and between 32 percent and 40 percent below normal in Massachusetts.

Paybacks of excessive premiums are required to give earned relief to millions of Americans who are unemployed or otherwise financially stretched by the pandemic, he said.

Auto insurers have reaped enormous profits from the declines in crashes.

In its August report, Progressive reported a 177 percent increase in monthly profits over August 2019, and said that its losses were substantially lower than usual due to the pandemic and various measures to combat it.

GEICO reported $2.1 billion in second quarter 2020 earnings before income taxes compared with $393 million in the second quarter of 2019, again due to fewer car crashes and reduced claims.

These covid windfall profits make it clear that the demand for greater refunds to consumers is not a request for assistance but a growing debt that insurers owe to their customers, according to CFA and CEJ.

While regulators in four states – California, Michigan, New Jersey, and New Mexico – initially ordered refunds for consumers, only California has mandated ongoing premium relief.

“In our previous letters to Commissioners, we provided analyses of these crash reductions and the need for premium relief,” said Birny Birnbaum, director of CEJ. “Those analyses have proven to be remarkably accurate.”

The current lack of refunds is hurting communities of color and low-income consumers the most, said Birnbaum.

“This makes it all the more important that Commissioners step up and make sure insurers are returning consumers’ excess premium on an ongoing basis,” he said.

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