Two insurers -- Allstate and American Family Insurance -- announced Monday they will give back about $800 million to their auto insurance customers because people are driving far less during the coronavirus crisis. Allstate (ALL) said it will refund about 15% of premiums paid by its customers in April and May, which comes to a total of about $600 million.
"Given an unprecedented decline in driving, customers will receive a Shelter-in-Place Payback," said Allstate CEO Tom Wilson "This is fair because less driving means fewer accidents."
Allstate's payments will go to all US and Canadian customers with personal auto insurance, whether or not their state has any kind of stay-at-home order. American Family, which only serves customers in 19 states, also said its payments would go to all of its customers.
American Family Insurance said it will give back about $50 per car that a household has insured with the company via a one-time payment. It said that will total about $200 million.
But Allstate is probably giving back only a fraction of the money it is likely to save from reduced insurance claims during the crisis said Dan Karr, the CEO of ValChoice, a data analytics company that acts as a watchdog on the insurance industry. Figures reported by Allstate to state insurance regulators show it pays out a little more than $1 billion a month in auto insurance claims, he said. Karr's modeling suggests that those claims are likely falling by about 85% due to the reduced number of accidents.
"I think it's great what Allstate did. But where's the rest of savings?" Karr told CNN Business. He said American Family Insurance's refund will probably equal even less of the average premium than Allstate's target of a 15% reduction.
Two insurers -- Allstate and American Family Insurance -- announced Monday they will give back about $800 million to their auto insurance customers because people are driving far less during the coronavirus crisis.