COVID affected auto insurers and policyholders significantly

While there has been a lot of attention paid to the industries that were dramatically affected by the novel coronavirus pandemic, in good ways and bad, auto insurance is one that may be too quickly overlooked. The obvious reasons that led people to drive less than they would have under normal circumstances had a significant impact on the ways auto insurers do business, and even prompted urging from elected officials to change people's premium costs.

The biggest way in which the pandemic seems to have affected auto insurers? A steep drop in the number of repairable crashes for which companies had to cover costs. In all, these accidents declined 22% during the early months of the outbreak, and proved to be a boon for both consumers and insurers, according to the latest J.D. Power U.S. Auto Claims Satisfaction Study. Likely as a direct result in such claims falling by more than one-fifth, insurers were also able to cut their turnaround times for processing claims, from a pre-pandemic average of 12.6 days to just 10.3.

As such, satisfaction scores for the auto insurers examined increased from 868 to 872 (out of a possible 1,000), setting a new record and marking the third straight year of overall growth in the score. When broken down into six different categories, the only one that did not see an increase was satisfaction with how insurers handled “first notice of loss,” which was unchanged on an annual basis. Claim servicing, the estimation and repair processes, rental experience and settlements all ticked up year over year.

As such, 76% of respondents said they “definitely will” re-up with their current insurers when their policies expire, an increase from 72% before the pandemic hit.

The nation's highways weren't quite as full as usual in early 2020.

Ups and downs
However, other aspects of the sector have been a little more hit-and-miss since March. Insurance Business Magazine notes that personal policy sales are estimated to decline 6.2% for the full 2020 calendar year in comparison with 2019, and the same is true to a lesser extent for commercial coverage, projected to drop 3.5%. That should come as no surprise; some estimates show that the number of miles driven in April and May dropped more than 40% and 25%, respectively, on an annual basis.

However, consumers also appeared to be shopping around for coverage once again, especially as the summer wore on. That may be particularly true because many auto insurers decided to cut rates or offer partial refunds on policy costs for consumers, simply because so many were driving less than they were accustomed to. That has been driven by younger millennials and Generation Z, as these adults were far more likely to have their households negatively impacted (at least from a financial perspective) by the pandemic and resulting economic downturn, and they may have had a greater need to simultaneously continue commuting and find more affordable coverage.

The coming impact
Of course, the U.S. is hardly out of the woods when it comes to the novel coronavirus threat, as cases are once again rising sharply nationwide and some experts believe the “new normal” won't go away until late 2021 or even 2022. A big part of the reason people were largely driving less in the early days of the pandemic was that many were laid off from their jobs, and tens of millions of Americans have been forced to file for unemployment insurance coverage.

That, in and of itself, could have a significant impact on auto insurers going forward, Forbes notes. People may choose to shop around for different, lower-cost coverage that does not provide as much financial protection, or be forced to go without coverage entirely, putting them at greater risk. This may be part of the reason insurers were so aggressive in advertising their premium rollback efforts in the spring, and there may also be other options for consumers to receive financial assistance when it comes to paying their auto insurance bills each month.

The changing situation
At the same time as insurers must acknowledge the financial strain many Americans are still dealing with, these companies must also contend with the reality that more people are heading back to work and, as a consequence, putting miles on their vehicles at rates similar to pre-pandemic levels. As such, many auto insurers are at least preparing to undo the premium rollbacks they put into place earlier this year, and some have already done so.

The Chicago Tribune notes that recent rate filings with Illinois regulators tell this story effectively: Those that are increasing rates are doing so in the low single digits, while some are choosing to reduce rates for 2021. However, these companies largely also acknowledge how uncertain the future is (i.e., shutdowns similar to those seen in March and April could become necessary at any point in the coming months) and are therefore not committing to those kinds of premium hikes.

The more insurers can do to give people dealing with these difficult conditions a little more flexibility and transparency in their coverage, the better off all involved are likely to be in the near future.