Staying at home due to coronavirus fears is giving motorists a break on their auto insurance costs.
Auto insurers are refunding billions of dollars of premiums to their policy holders, citing a dramatic drop in driving and accident claims from Americans hunkered down in their homes.
Major insurers are voluntarily cutting rates or offering paychecks back to their customers in response to the reduced number of accidents as motorists stay off the road and heed stay-at-home orders.
(READ MORE: Traffic volume cut by half as coronavirus orders keep Tennesseans at home)
Farm Bureau Insurance of Tennessee, one of the largest auto insurers in the state, is issuing $30 million in special payments to auto policyholders across Tennessee, starting the first week in May. Farm Bureau insures about 1.2 million vehicles in Tennessee and company CEO Jeff Pannell said the mutually owned insurer will use its reserve funds to make the one-time payment during the current extraordinary crisis and write physical checks back to auto policy owners. The payments will be worth roughly 24% of what policyholders would pay for two months time, officials said.
"During the state's stay-at-home order, Tennesseans are driving less and are filing fewer automobile claims," Pannell said. "While that trend may continue, and some insurers are taking a 'pay it back' approach, Farm Bureau Insurance is opting to 'pay it forward."
America’s biggest auto insurers
1. State Farm $42 billion in premiums, 17% market share2. GEICO $33.1 13%3 Progressive $27.1 11%4 Allstate $22.7 9%5 USAA $14.5 6%6 Liberty Mutual $11.8 5%7 Farmers $10.5 4%8 Nationwide $6.7 3%9 Travelers $4.7 2%10 American Family $4.7 2%Source: ValuePenguin, Lending Tree, April 2020
Dan Batey, vice president of corporate communications at Farm Bureau, said its auto claims are down by as much as 40% since stay-at-order issues were made. Despite the drop in accidents, Farm Bureau and other auto insurers have had to absorb hundreds of damage claims from tornadoes last month in Middle Tennessee and this week in Chattanooga.
WHAT INSURERS ARE GIVING BACK
State Farm, the nation's biggest auto insurer by revenue volume, said its returning $2 billion in dividends to auto insurance customers nationwide, starting Monday and running through the end of May.
State Farm's "Good Neighbor Relief" program will benefit approximately 21 million households and save, on average, about $20 a month for each vehicle insured. The average annual State Farm auto premium is approximately $950 a year, the insurer said.
Allstate said it would dispatch more than $600 million in shelter-in-place payback checks, while American Family Mutual Insurance Co. said it is returning $200 million to its smaller policyholder base.
Geico is giving a 15% credit for the next full policy terms, and Esurance is giving a 15% payback during April and May. Traveler's is giving people a 15% credit on April and May premium and suspending cancellations through May 15, while American Family Insurance is providing customers a one-time, $50 payment for each vehicle insurance under a personal auto insurance policy.
$100 BILLION IN SAVINGS
A new report by the data analytics company ValChoice estimates that insurance companies could collectively realize $100 billion in savings due to the change in driving habits forced by shelter-in-place mandates.
"Auto insurance companies could receive out-sized profits due to COVID-19," said Dan Karr, CEO and founder of ValChoice. "This is money owed consumers who are now driving far fewer miles and presenting far lower risk to their carriers."
California Insurance Commissioner Ricardo Lara last week ordered insurance companies to provide premium discounts for March, April and possibly May in at least six lines of personal and business insurance "where the risk of loss has fallen substantially" because people are driving less.
Lara said collisions on California state highways dropped nearly in half in some urban areas compared to a year ago.
In Tennessee, traffic also has dropped to less than half the year-ago levels on local streets and state highways.
While traffic on Tennessee freeways had been growing 2-3% annually in recent years, the Tennessee Department of Transportation reported that the volume of cars and trucks on the road plunged anywhere from 36% to 59%from 2019 levels in the state's biggest cities after mayors and Gov. Bill Lee issued stay-at-home orders for non-essential workers.
The Center for Urban Information at the University of Tennessee at Chattanooga, which is studying traffic patterns along M.L. King Boulevard in downtown Chattanooga, counts far fewer motorists on the road compared with the period before the coronavirus crisis.
Tennessee regulators are not ordering any rebates or refunds for auto insurers, although claims data could impact future rate reviews and approvals.
"Most of our large carriers have voluntarily offered premium refunds to Tennesseans so the department will not be requiring refunds," said Kevin Walters, a spokesman for the Tennessee Department of Commerce and Insurance. "As far as rate changes and adjustments go, it would be difficult for us to determine how much rates should drop. We do not have data to project how far claims will drop."
CHEAPER GAS
As auto insurance gets cheaper, the price of refueling your vehicle also has dropped to the lowest level in more than four years and, considering the improved fuel efficiency of most vehicles today, some of the lowest inflation-adjusted prices for refilling your car in history. Last week, the average price of regular gas in Chattanooga was hovering around $1.50 a gallon with fuel as cheap as $1.16 a gallon at some stations.
Of course in the cruel irony of the coronavirus crisis, most people can't-or at least shouldn't-take advantage of these the cheaper gas since they are being urged to stay home to limit the spread of COVID-19.
"But the good news is that even once this is over, I expect far more affordable prices this summer due to a hangover in oil supply," said Patrick De Haan, an analyst for the online gas price survey service GasBuddy.com
Contact Dave Flessner at dflessner@timesfreepress.com