How COVID-19 Affected Car Insurance Companies

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With lockdowns and quarantines in effect, drivers found themselves driving fewer miles in 2020. Since people were staying at home more, they understandably didn’t want to pay as much for car insurance. Many car insurance companies were lenient with missed payments and offered partial premium refunds.
However, the prolonged effects of COVID-19 have taken a toll on the industry. How did insurance providers modify their policies during the peak of the pandemic, and how much did relief programs cost?
Woman wearing a medical mask driving a car
Many drivers saw reduced rates and premium refunds from their car insurance providers.

Car insurance companies offered refunds and lower rates

According to U.S. News and World Report, insurance policies are typically canceled if the policyholder fails to make payments on time. Some companies have grace periods, but these usually don’t last for longer than a week. However, due to the circumstances of the pandemic, insurance companies granted longer grace periods on a case-by-case basis.
Depending on the situation, some policyholders were even eligible for a forbearance or financial hardship program. However, policyholders couldn’t enroll in either of these programs if they let their insurance expire.
Drivers have also been able to lower their insurance rates simply by reaching out to their providers. During the pandemic, many commuting workers switched to work-from-home routines, meaning they were driving less. Some were able to modify their coverage to be classified as a low-mileage driver.
Some individuals, especially those with health conditions, stopped traveling completely during the height of the pandemic. Several insurance companies offered widespread premium refund programs to all policyholders. Many of these programs are now expired.

How much did this cost insurance companies?

In 2020, CNBC reported that the vast majority of insurance providers committed to refund drivers $6.5 billion in premium charges. American Family issued its policyholders a $50 payment per vehicle as part of its relief program. State Farm also provided its policyholders with $20 a month for each vehicle insured. GEICO offered similar incentives, but only for customers who planned to renew their policies within the next six months.
West Bend policyholders were protected from insurance termination through the end of May 2020. Late fees were also waived and the company issued a $50 one-time payment per customer. AAA also paused its termination policies for both its auto and home insurance programs.
Amica Mutual’s relief program lasted a little longer, extending to early June 2020. Erie Insurance slashed its rates for both commercial and personal auto policies, returning $200 million to its customers.
In addition to financial losses in the industry, insurance agents were also hard-hit by the pandemic. As more drivers contacted companies to lower their rates, more employees were needed to assist them. This resulted in insurance agents working longer hours while also trying to protect themselves from getting sick.
This led some insurance workers to experience burnout and even leave their positions entirely due to stress. As of last April, NPR says that more than 4 million Americans have left their jobs over the past year.

Has the car insurance industry returned to normal?

According to Insurance Business Magazine, the auto insurance market is nearly as stable as it was before 2020. Additionally, overall insurance shopping has gone up in August 2021 compared to 2019. This is partially due to all the refunds offered in early 2020, resulting in more consumer loyalty for some insurance companies.
However, some providers are still slashing their premiums to appease new buyers. Others have kept their rates the same in anticipation for the market to completely return to normal.
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