The impacts of the pandemic have reverberated into many lines of insurance, but perhaps one of the most direct consequences of country-wide lockdowns in the US has been evident in auto insurance. In our guide to car insurance and coronavirus, we’ll explore the implications of this worldwide pandemic on the car insurance industry and what it means for you as an insurance customer.
Major Changes in Driving Habits Could Mean Savings
Lockdown orders due to the coronavirus pandemic have led to dramatic mileage decreases for many drivers. So what does this mean for auto insurance and consumers’ coverage needs? Insurance companies are navigating the tricky questions raised by the social and economic disruption brought about by COVID-19. The companies’ decisions and policy changes during this unprecedented period could have an impact on policyholders’ pockets.
As the pandemic began to spread in March and state-mandated shutdowns followed suit, the widespread turn to remote work meant that vehicles were left parked for potentially weeks, if not months. As a result, many auto insurers began to offer discounts and refunds on their customers’ auto insurance premiums. Now, despite the fact that many drivers have returned to the roads, the pandemic’s reverberations on vehicle usage and insurance cover will likely continue into the future.
What if I’m No Longer Commuting?
Whether you’re working from home or looking for work, you’re likely finding yourself at home for days on end while your car goes undriven for extended lengths of time. Car insurance based on telematics or per-mile usage may appear to be an attractive option for these situations.
While it may initially be cheaper, keep in mind that it’s usually a better option for those who are not driving much for the long term. Once you resume your daily commute and other activities, these telematics and pay-per-mile insurance options may actually become more expensive than a traditional policy. However, they are definitely worth looking into if you’re looking to tighten your costs and lower your premium.
If There’s Less Risk, Are There More Rewards?
Rewinding back to the pandemic’s early days in the US, lockdowns led to a drop of 40.2% in miles driven in April and a 25.5% drop in May. After all, alongside the drop in traffic during the lockdown period, there was also a reduction in the number of accidents and the dollars associated with those because of the inactivity in the marketplace from an economic standpoint.
The question is, will there be another round of premium refunds, will COVID lead to another full shutdown of the economy or significant portions of the economy shutting down, and will that lead to another dip in total premiums and loss activity.
Currently, the general sense among experts is that premiums will take a while to return to pre-COVID levels because although the economy is starting to get back to work and shutdowns are not nearly as severe as they once were, some changes in driving behavior are going to stick around. Several companies have already made public announcements that their employees will continue to work remotely for the foreseeable future, which in turn will lead to insurance companies potentially reducing rates, and getting less premiums because of less exposure for risk in the marketplace.
How Will Coronavirus Affect My Rates?
It is still too early to ascertain the impact of COVID-19 on car insurance rates, even as Americans sharply reduce how often they’re on the road. While auto insurance companies have reported fewer accidents and claims attributed to state lockdown orders, it is difficult to say definitively that they will pass on savings in the form of coronavirus car insurance discounts.
Insurance companies use multiple years’ worth of data to set premiums, and this makes any changes to rates very gradual. Unless this substantial decrease in accidents and claims persists for a lengthy period of time, it is unlikely that auto insurance rates will permanently decrease as a side effect of the pandemic.