Has COVID-19 Affected Car Insurance Rates?

COVID-19 has decimated the US economy, dragged the workforce to its knees, and caused an unprecedented rise in unemployment. Every industry has been affected in one way or another and the insurance sector has been dealt a particularly hard blow.

But have car insurance rates changed throughout this period, what kind of impact has COVID-19 had on auto insurers, and are there any changes you need to know about?

What Do I Need to Know about COVID-19 and Car Insurance?

COVID-19 has caused a lot of uncertainty and paranoia. Many consumers have questions that are going unanswered, and many companies are too overwhelmed to appease them. These FAQs include:

Should I Cancel My Car Insurance?

Just because your car is sitting in the garage, doesn’t mean you don’t need car insurance. It’s a little infuriating to know that you’re paying for something you’re not using, but it’s much easier to stay legal, stay insured, and know that your car will be there if you need it.

On the plus side, just think about all the gas money that you’re saving! Americans spend over $2,000 on gas, and hundreds more are spent on maintenance. Your insurance premiums may remain, but at least you’re saving elsewhere.

Can I Adjust my Car Insurance?

You could save on your auto insurance premiums by increasing your deductible, dropping collision coverage, and rethinking rental car reimbursement coverage and roadside assistance. These things might not be necessary if the coronavirus is keeping you off the road, allowing you to save money without doing anything drastic.

Speak with an insurance agent for more information.

Can I Suspend my Auto Insurance?

If your car is stuck in the garage or on the driveway, you could move over to car storage insurance. It will drop collision coverage and liability insurance and cover you for vandalism and theft. You’ll need to look at your state requirements, speak with your insurance company, and jump through the necessary hoops, which may include canceling your registration.

Again, it’s not the best option, especially if you’re just waiting for the chaos of the COVID-19 pandemic to end and your life to return to normal. It could be something that takes another year or two. If things go your way, it may be just a few months.

Can I Save with Less Mileage?

Most car insurers, including Geico, Nationwide, and Allstate, offer discounts for low mileage. They install a device in your car that will track your driving habits and your mileage. If you’re barely leaving the house or making only occasional trips to the store, you could save tens of dollars a month.

What Should I Do as a Delivery Driver?

If you’ve taken some part-time work as a delivery driver, you may need additional insurance coverage. A personal auto insurance policy will likely not cover you for commercial use, but you can purchase a commercial auto policy or opt for a business-use add-on to your existing policy.

How Did the Auto Insurance Industry React to the Coronavirus Pandemic?

Insurance companies have tried to assist policyholders as best they can, and most have responded with offers, grace periods, and other solutions, including:

  • AAA: Offered roadside assistance for healthcare workers and first responders. An initial 20% rebate was also provided.
  • Allstate: Offered automatic coverage for small businesses and delivery drivers.
  • ​American Family: All policies received a 10% refund through December 2020.
  • Farmers: Reduced payments and paused cancellations.
  • GEICO: A 15% credit was automatically applied for all policyholders through the 7th of October 2020.
  • Liberty Mutual: Payment dates were extended and refunds were offered.
  • Nationwide: Payment dates were extended, late fees were waived, and a $50 credit was applied to all accounts active as of the 31st of March.
  • Progressive: Offered extra time and payment options for those suffering from financial hardship.
  • ​State Farm: Payment refunds of up to 25% were offered and help was provided to policyholders who needed it.
  • USAA: Additional coverage was offered to policyholders using their vehicles for business purposes. A 20% discount was also applied.

Have Traffic Accidents Decreased Because of COVID-19?

The near-global lockdown of March 2020, along with the minor national and local lockdowns that followed, led to a significant reduction in traffic. It was anticipated, therefore, that we would see an equally significant reduction in road traffic accidents, but this didn’t materialize as expected.

study conducted during the first few months of lockdown noted that while minor accidents did decrease, there was no change in the prevalence of major traffic accidents. They speculated that drivers were driving faster because there were fewer cars on the road. Furthermore, when everything returned to “normal,” those figures returned to the baseline.

It’s unlikely, therefore, that insurers will pass any so-called savings onto their customers because of a perceived reduction in claims. It’s also worth noting that while car insurance claims are low, the same can’t be said for other parts of the industry.

Insurance companies have ways of avoiding claims for travel insurance and business interruption. COVID-19 was so unexpected that few individuals thought it necessary to purchase additional cover and have found themselves high and dry as a result.

But life insurance claims have increased significantly, with as many as 40.4% more excess deaths recorded during the first half of 2020. An excess death is one that climbs above the anticipated mortality rate for that period and could be directly or indirectly related to COVID, such as an individual refusing necessary health care because they were scared of being exposed to the virus.

Insurance companies also play the markets, using money from their policyholders to invest the same way that banks do, and 2020 saw massive stock market instability.