Washington, D.C. – Berkshire Hathaway’s quarterly financial statements show that its GEICO subsidiaries reaped a massive $2.1 billion in second quarter 2020 earnings before income taxes compared with $393 million in Q2 of 2019. The windfall was driven by fewer accidents during the COVID-19 pandemic. GEICO, the nation’s second largest auto insurer, is the only one of Berkshire Hathaway’s nine “business segments” broken out in its quarterly statement that improved upon 2019’s second quarter results.
The five-fold increase in quarterly earnings illustrates that GEICO’s pandemic “giveback” program has been insufficient to account for the dramatic reduction in risk associated with the drivers buying its auto insurance policies, according to consumer advocates. Consumer groups are urging GEICO to return more of their pandemic profits to consumers, and the groups say state regulators must take action if GEICO continues to hoard the excess premium.
“We previously said that GEICO and other auto insurers are sitting on an unearned gold mine due to this pandemic,” said Bob Hunter, CFA’s Director of Insurance. “Now there is even more proof, according to their own figures, and GEICO stands out, because they have been especially stingy toward consumers. Most auto insurers announced automatic premium credits or refunds for consumers, however insufficient many of them were. But GEICO requires its customers to renew their policies before it will give the 15% credit, which also means millions of their customers have still not received a dime of the giveback that was promised as a response to the shutdown this past spring.”
The Consumer Federation of America (CFA) and Center for Economic Justice (CEJ) previously issued letter grades to auto insurers on their premium refunds. While few received an A and most auto insurers received a C, GEICO was the only major insurer to receive a D-.
“By mid-March, GEICO’s auto rates were clearly too high as anyone could see that auto claims would drop dramatically as roads emptied,” said Birny Birnbaum, Director of the CEJ. “While most insurers provided immediate relief—albeit insufficient to match the drop in auto claims—GEICO didn’t provide relief until and unless the policy was renewed. GEICO’s massive second quarter windfall COVID profits are an insult to consumers suffering from pandemic-related economic distress. If GEICO doesn’t do the right thing by consumers, then insurance regulators should start doing their job and tell GEICO to give the premium relief consumers need and deserve.”
According to CFA and CEJ, state insurance commissioners need to do more to ensure that auto insurers return more of their excess income to their policyholders and former customers. At this time California, New Mexico, Michigan and New Jersey are the only states requiring auto insurers to return pandemic-driven excess premium to customers.
Notably, with respect to GEICO’s giveback, New Mexico Insurance Superintendent Russell Toal prohibited insurers from withholding pandemic refunds until customers renew (“Insurers are prohibited from making the premium adjustment in the form of a credit that will apply to a renewal policy, or contingent upon renewal of a policy”). Similarly, in California, Insurance Commissioner Ricardo Lara is considering a challenge to GEICO’s renewal-contingent giveback brought by CFA member organization Consumer Federation of California.
Doug Heller, 310-480-4170
J. Robert Hunter, 703-731-6353