State Regulation

Auto Insurers Reap Tens of Billions in COVID Windfall Profits Due to Reduction in Miles Driven and Crashes

Insurance Commissioners are Asleep at the Wheel When It Comes to Putting this Money Back in Consumer Pocketbooks Where It Belongs

Washington, D.C. – In a case of “anyone could see this coming,” Consumer Federation of America (CFA) and the Center for Economic Justice (CEJ) took state Insurance Commissioners to task for failing to prevent windfall auto insurer profits as auto claims dropped when driving and auto crashes declined. The groups labeled the excuses of some regulators for failing to protect consumers as “pathetic.” The letter is available here.

“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, CFA’s Director of Insurance and former Texas Insurance Commissioner. “The overwhelming need for Insurance Commissioners, who are charged with ensuring rates are not excessive, is 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.”

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 indicate that crashes remain between 14% and 20% below their 2019 level in Texas, and between 32% and 40% 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.

Auto insurers have reaped enormous profits from the declines in crashes. In its August report, Progressive reported a 177% increase in monthly profits over August 2019, and noted that its losses were substantially lower than usual due to the pandemic and various measures to combat it. And 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 consumer advocates. 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. And the current state of affairs is hurting communities of color and low-income consumers the most. This makes it all the more important that Commissioners step up and make sure insurers are returning consumers’ excess premium on an ongoing basis.”

J. Robert Hunter, CFA, 703-528-0062
Birny Birnbaum, CEJ, 512-912-1327
Doug Heller, CFA 310-480-4170