Allstate, Geico Among Large Auto Insurers Facing COVID-19 Rebate Backlash

Large auto insurers offered rebates at the onset of the coronavirus shutdowns, but some consumers believe it was not enough.
By: | August 25, 2020

At the onset of the COVID-19 pandemic, many large car insurers realized that their policyholders were not driving to work, school, practices, shops and more as social distancing and shelter-in-place became the norm.

In order to reflect this drop in cars on the road, large insurers began to offer rebates to customers. Liberty Mutual, State Farm, Geico, Allstate and more offered some level of premium relief for drivers.

However, in some cases, it did not appear to be enough.

Several lawsuits have been brought to light in recent weeks alleging certain insurers failed to provide “fair and appropriate” rebates and, instead, unfairly profited from high rates.

In Illinois specifically, policyholders have come for Allstate and Geico, as well as Progressive, Travelers and a few others, with six separate lawsuits filed in the last week of July alone.

The policyholders are alleging the insurance relief offered during the pandemic did not go far enough when accounting for the drop in claims these auto insurers were seeing during the same interval.

Statistics show miles driven by Illinois motorists dropped by nearly two-thirds during March and April.

To the policyholders, the 15% credit offered by Allstate specifically “falls short of the relief that any fair and reasonable actuarial analysis would require.”

Many of the complaints have also compared the auto insurers to their competitor State Farm, which, in April, offered most policyholders a 25% credit.

The Illinois-based news source Herald & Review reports, “The suits allege the insurers violated the Illinois Consumer Fraud and Deceptive Business Practices Act. In addition to Allstate, American Family Insurance, Progressive, Geico, Erie Insurance and The Travelers Company are named as defendants.”

At this time, attorneys representing the Illinois consumers are seeking class-action status for the suits.

Some predict thousands of policyholders represented by the named defendants could join each suit before the end of the year.

Scorecard: Several large car insurers will have to prepare for incoming suits regarding their rebate response to the novel coronavirus pandemic.

Takeaway: Across the country, businesses and individuals alike are seeking restitution for lost income during the pandemic. Business interruption and auto lines are just the start. &

Autumn Demberger is the content strategist at Risk & Insurance®. She can be reached at [email protected].

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