Are Auto Insurance Givebacks Fair?

Givebacks Are Consumers Really Getting a Good Deal? The COVID-19 pandemic radically changed many aspects of American life In March 2020, parts of the U.S. saw a including driving habits 60% drop in miles driven Less Driving, Lower Insurance? Less driving means fewer... Low-speed accidents Incidents of aggressive acceleration Auto Insurers Giveback To help drivers experiencing financial hardship during COVID-19, insurance companies are offering: Financial assistance and flexible payment programs Waived deductibles for Penalty-free grace period for late payments Paused cancellation due to non-payment commuting healthcare workers Some of the nation's biggest insurers have begun refunding auto insurance premiums in response to the sharp decrease in Americans' driving mileage 25% Auto insurance premiums decreased by up to 25% in spring 2020 In total, $14 billion was returned to policyholders Allstate. GEICO PROGRESSIVE State Farm $1 BILLION+ in paybacks $2.5 BILLION in total refunds $1 BILLION in total paybacks $4.2 BILLION in savings for customers Some Americans are driving more home delivery and high unemployment have more people turning to gig work apps like DoorDash high demand for Is A Total Refund Coming? A reduction in driving mileage can't translate to an equal refund percentage Variation in severity of accidents Unpredictable changes in driving habits Multiple variables keep auto insurers from offering complete refunds Claims for delayed repairs due to lockdown Increased repair costs due to supply chain disruptions Less driving could mean more insurance claims 60 70 60 70 50 50 40 40 Less traffic leads to more high-speed incidents 30 50% 30% INCREASE IN ACCIDENTS INCREASE IN ACCIDENTS while driving over 70 mph while driving over 100 mph An increase in speeding may lead to Increase in claims More severe accidents Higher cost claims Understanding Risk Pools Car insurance is required for drivers nationwide – meaning insurers cover drivers with varying levels of risk HIGH-RISK: Teenagers or drivers with a history of moving violations LOW-RISK: Experienced drivers who have never received a ticket Risk pools spread claim costs across more individuals, keeping premiums lower An individual driver's claim Other drivers' premiums may cost more than their premiums make up the difference HIGHER-RISK DRIVERS PAY HIGHER PREMIUMS driving less may reduce your risk profile and provide an opportunity for savings 94% OF CAR ACCIDENTS are caused by human error Could autonomous vehicles help decrease car accidents and lower auto insurance premiums? speeding, driving under the influence, distraction, and drowsiness Autonomous Driving and Auto Insurance Fewer insurance claims In the future, increased autonomous vehicles may lead to Lower premiums Shift in liability Liability will shift from the driver to the vehicle Who is responsible for autonomous driving? Driver behavior and claim history will be irrelevant New calculations for determining risk Do Autonomous Vehicles Need Insurance? Determining fault in an autonomous vehicle accident is complex If the driver is in control, traditional auto insurance will prevail 6% OF ACCIDENTS are caused by the vehicle malfunction, environment, and other reasons beyond the driver's control BUT, if autonomous technology is engaged, Should the Should the driver manufacturer be liable be liable for failing for all accidents? to intervene? The simplest solution may be no fault or split fault personal auto insurance A Simpler Approach To Insurance Rather than personal auto insurance, autonomous vehicle manufacturers may Manufacturers would be able to Compute the exact probability of accidents start offering their own insurance option Offer lower insurance premiums Manufacturer-issued insurance would eliminate the need to determine if the vehicle or driver is liable Decrease premiums with each new release or upgrade Whatever the details, adoption of autonomous vehicles will reduce the risk profile of many drivers By 2035, adoption of autonomous vehicles could reduce auto insurance premiums by $25 billion Sources: time.com/5836868/gig-economy-coronavirus insurancejournal.com/news/national/2020/01/15/554949.htm pocketsense.com/types-insurance-uninsurable-risks-8012096.html Will you switch to autonomous driving in exchange for a lower insurance premium? foundershield.com/insurance-for-autonomous-vehicles-self-driving-cars accenture.com/_acnmedia/pdf-60/accenture-insurance-autonomous-vehicles-pov.pdf inquirer.com/news/virus-doordash-grubhand-profits-competition-sales-20200427.html AutoInsurance.org N NOWSOURCING aarp.org/auto/car-maintenance-safety/info-2020/coronavirus-car-insurance-premium-refund.html insurancebusinessmag.com/us/news/commercial-auto/how-covid19-has-changed-our-driving-habits-223107.aspx forbes.com/sites/advisor/2020/04/15/how-did-car-insurance-companies-decide-on-their-refund-amounts/#74ef28e43e8f npr.org/sections/coronavirus-live-updates/2020/05/06/851001762/the-pandemic-emptied-american-roads-but-driving-is-picking-back-up forbes.com/sites/forbestechcouncil/2018/07/02/prediction-self-driving-car-manufacturers-will-own-the-car-insurance-business/#3537d83e7f3c mmc.com/content/oliver-wyman/global-risk-center/insights/insights/publications/2019/jul/the-autonomous-vehicle-revolution--how-insurance-must-adapt.html 80 90 100 110 120 80 90 100 110 120 O 10 20