auto insurance covid 19
The coronavirus pandemic caused business shutdowns across most industries, movement restrictions, and school closures. With fewer drivers on the road across the country, a significant impact on the auto insurance industry didn’t come as a surprise to many stakeholders.
Here’s how the coronavirus pandemic has impacted driving.

1. Mileage is Down 12%

With business shutdowns and hundreds of millions of people working from home, there wasn’t going to be much driving or commuting going on across the nation. As a result of the coronavirus outbreak significantly restricting driving, overall mileage plunged by 12% in 2020, according to the Insurance Information Institute (Triple-I).

2. Insurers Returned $14 Billion to Policyholders

In the spring, many of the leading U.S. insurance companies took the initiative to give back auto insurance premiums to their customers. With the coronavirus pandemic dramatically curtailing driving, there were fewer vehicles on the roads, which meant fewer car accidents to cover.

Triple-I estimates that insurers will have refunded up to $14 billion to auto policyholders, which amount to roughly 15% of the insurance premiums paid over the second quarter. Despite the premium refunds, the auto insurance sector appears to be doing fine. That’s because second-quarter data shows a decrease of between 7% and 40% in loss costs over the past 12 months. Some auto insurance coverage options had more significant losses than others over that duration.

3. Frequency of Auto Insurance Claims Down, Severity Way Up

Fewer accidents translated to fewer claims, which is how insurers could afford the COVID-19 premiums givebacks. However, the accidents that did occur tended to be more severe than before the pandemic. According to Triple-I, the severity of car accident damage increased by roughly 20%, although motorists reported fewer property damage incidents. Sadly, auto accident fatalities increased by 4% over the same 12-month period.

4. Fast-Driving Accidents May Trigger a Rate Increase

Motorists may be driving shorter distances than a year ago, but they’re going much faster. That’s probably a major factor behind the shocking spike in claim severity in 2020.

Auto insurance industry analysts expect the frequency of car accident claims to gradually return to normal as motorists start driving more. The only problem is that the increased speeds, as seen during the pandemic, may not go away soon. As you’d expect, when claims for any covered risk become too expensive and frequent to pay, insurers may respond by hiking premium rates.

5. Use of Telematics to Monitor Driving Habits

Insurers have made good use of telematics to monitor driver behavior during the pandemic. The driving data they extract enables them to price auto insurance products based on usage more accurately. It appears that more policyholders than ever before are happy with the usage-based pricing model. About 58% of drivers that Arity surveyed this year expressed satisfaction with their carriers basing their auto insurance rate on distracted driving data. That’s 39% more drivers approving telematics use in insurance.

Typically, telematics lets insurers track driver information such as location, speed, distracted driving, harsh acceleration or braking, and much more. Using this information, your carrier can assess key aspects of your driving risk and base your rate on that assessment. The use of telematics data by insurance companies during the COVID-19 pandemic has benefited auto policyholders too. This technology has enabled carriers to fast-track the delivery of premium refunds to consumers.

Less driving, premium refunds, and claims severity spikes are some of the noteworthy COVID-19 auto insurance effects. As the world slowly returns to the roads and resumes their previous driving habits, now may be a good time to take a look at your auto insurance coverage. Talk to the team of professionals at Sausman Insurance Agency for help finding reliable auto insurance coverage. We serve Mifflintown, Millersburg, and beyond with quality policies. We look forward to assisting you to secure reliable and comprehensive coverage that suits your needs and budget.