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Auto insurance companies made a windfall from COVID-19.
Early into the pandemic, consumer groups (specifically the Consumer Federation of America and the Center for Economic Justice) began pressing auto insurance carriers for premium refunds as people stopped driving. While some companies responded with some premium relief, they did so only for a short time. As a result, as both groups recently put it, “The staggering drop in accidents this year resulted in a dramatic drop in claims paid by insurers, handing companies massive windfall profits even after accounting for the woefully inadequate premium relief provided in the spring.” Consumer Federation of America press release, “Auto Insurance Refunds Needed as New Data Show Crashes Remain Well Below Normal Due to Pandemic; 23% Fewer Accidents in September and October,” December 22, 2020; Leslie Scism and Allison Prang, “Travelers More Than Doubles Quarterly Income,” Wall Street Journal, October 20, 2020 (“Property-casualty insurer Travelers Cos. more than doubled its net income in the third quarter, benefiting from auto policyholders driving fewer miles and increased premium rates.”)
Instead of refunding money to policyholders, companies – touting the pandemic’s impact in financial reports – rewarded shareholders with dividends.
“Progressive reported over $3.3 billion in net income between April and September (Q2 and Q3), which is $1.5 billion, or 82%, more than it earned during the same period last year. On December 4, Progressive announced a $4.50 per share annual dividend for its shareholders (~$2.6 billion), which is nearly double the 2019 annual dividend. GEICO’s pre-tax earnings tripled during the second and third quarters of 2020 to $2.34 billion compared with $769 million in 2019. The third quarter earnings are up 83% from $835 million in earnings for the third quarter of 2019. Allstate reported auto insurance underwriting income for the combined two quarters of $1.87 billion, more than a billion dollars better than 2019.” Consumer Federation of America press release, “Auto Insurance Refunds Needed as New Data Show Crashes Remain Well Below Normal Due to Pandemic; 23% Fewer Accidents in September and October,” December 22, 2020.