How COVID-19 May Be Affecting Your Auto Insurance
During the past nine months of working from home due to the COVID-19 pandemic, many people have driven less often. With the exception of essential workers and those who cannot perform their jobs remotely, you may only take the car out for a grocery store run.
In response, many auto insurance carriers have noticed the sudden drop in miles and issued discounts and refunds on premiums. Could this shift be reflected in your auto rates?
How Carriers Are Responding
Many drivers across the country pay a flat yearly or six-month rate for auto coverage, or send a premium each month until their policy is up for renewal.
Rates are based on previous driving habits and carriers take notice of this factor. During the pandemic, many auto insurance carriers have seen fewer claims from drivers and provided partial refunds on premiums.
Based on data from the Insurance Information Institute, auto insurance carriers have refunded about $10.5 billion in premiums and other benefits thus far, in the form of a discount or credit to use toward future premiums.
Due to these changes, more drivers have started shopping around for auto insurance quotes – particularly younger Millennials and Gen Z consumers, who may be facing higher rates due to inexperience, age and who may have seen their income decrease during the pandemic.
Additional Factors
Yet, the future of auto insurance is not as simple as fewer miles equal lower rates. While certain driving habits have changed significantly, gains are not even across the board.
Not Everyone Is Staying Home
Essential workers have likely not seen their driving habits change significantly during COVID-19. At the same time, many companies have embraced the work-from-home arrangement for the average office worker.
Yet, the change is not evenly distributed. In states with fewer restrictions, more non-essential workers have returned to pre-pandemic commuting habits.
As one possible outcome, auto insurance carriers may place more emphasis on their growing pay-as-you-drive and custom insurance initiatives. On the flipside, the low rates experienced during spring and summer may jump back up in 2021.
Distracted Driving and Speeding
Unfortunately, many drivers who see open roads and fewer motorists may take the opportunity to drive distracted or above the posted speed limit. Cities and states have reported a higher number of cars driving over 100 MPH, a habit which puts others at risk.
As a result, in some parts of the country, year-over-year accident levels have remained flat by the numbers but soared sharply percentage-wise due to fewer cars out on the road.
More Commercial Usage
Individuals who lost their full-time job during the pandemic may have started working for a delivery service or ride share company to keep themselves afloat.
While blended personal and commercial auto policies were receiving some attention well in advance of the pandemic, this economic shift has meant more individuals are using their personal vehicles for commercial purposes, and often don’t have the insurance coverage to handle an accident and other business-related risks.
Drivers Believe They Don’t Need Insurance
One falsehood that has circulated during the pandemic is that drivers who aren’t traveling don’t need auto insurance. If your car will remain parked in the driveway for the foreseeable future, you may be able to cancel coverage but you risk being caught without proof of insurance every time you go out for a quick ride.
In these cases, you could be faced with fines, a license suspension and higher insurance premiums – and that doesn’t factor in the out-of-pocket costs if you get into an accident.
Final Takeaway
Unfortunately, while discounted premiums were a great benefit to drivers early on, the trend likely won’t last at an industry-wide level.
While most drivers are spending less time on the road, more accidents are occurring proportionally and more motorists appear to be engaging in reckless behavior. As a result, the chance premiums may return to pre-COVID levels remains strong, although that change may be on a carrier-by-carrier or driver-by-driver basis.
Have your driving habits changed significantly during the COVID-19 pandemic? If you’re shopping around for a lower rate, discuss coverage options with Ion Insurance today.
