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Coronavirus: With Americans hardly driving, should insurers give bigger discounts?

Aimee Picchi, Special to USA TODAY

Drivers should get bigger car insurance discounts, consumer advocates argue, citing the drop of miles driven and accident claims during the coronavirus pandemic.

Though auto insurers give customers average premium refunds of about 15%,  advocates argue drivers are owed much more – twice as much. 

A 30% discount would  reflect a roughly 50% decline in miles driven and accident claims during the crisis while tempered by some higher insurer costs, such as a likely rise in unpaid policies, says Birny Birnbaum, an economist and executive director of the Center for Economic Justice, which analyzed pandemic driving and claims in a study this month. Given the change in driving patterns, auto insurers’ rates “became excessive overnight,” Birnbaum says.

The pandemic upended daily patterns for the nation’s more than 220 million licensed drivers. For many, the typical commute of 55 minutes behind the wheel has disappeared as they work from home. That’s prompted some consumers to hope for a price break from their insurers. The typical consumer pays about $1,400 annually to insure a car, so it’s not an insignificant financial issue.

While most states are under stay-at-home orders from governors, traffic is down almost everywhere, and that means lower crash rates and fewer insurance claims. As a result, many auto insurance companies are cutting rates, sending checks or offering credits on monthly bills.

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One of those drivers is John Johnston, a computational specialist from Perry, Michigan, who largely works at home during the pandemic. He no longer makes a 30-mile daily commute to his office or takes frequent family trips to Canada or drives to restaurants and theaters with his wife. 

“I’m barely driving,” he says. 

When his auto insurer emailed him to say he’d receive a refund for April and May, he says he expected about $100 off his annual bill of about $1,800. Instead, he was given a refund of $35.11 – less than 10% of the cost of insurance over two months. 

“I expected it to be underwhelming, but not that underwhelming,” he says. 

Other drivers say they are confused by the refunds offered by their insurers. Shauna Dillenbeck of Boise, Idaho, says her insurer, State Farm, told her it earmarked billions in refunds for customers – but she has yet to see a reduction in her monthly $160 insurance bill.

“I would like to have seen maybe 50% off,” Dillenbeck says, noting that she drives about 10 miles a month compared with 500 miles a month before the pandemic. 

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State Farm says Dillenbeck and other customers will probably see refunds on their June statements. Those credits will reflect a 25% discount for premiums from March 20 through May 31. The company is reducing its auto rates by an average of 11%, although the rate reduction will go into effect when the customer renews the policy.

State Farm offered one of the better responses to consumers, according to Birnbaum. His group gave the insurer an “A” rating for its response. Other insurers earned a poor grade, including GEICO, which scored a D-. GEICO offers a 15% credit to customers who renew their polices from April 8 to Oct. 7, which means some customers may wait for months to see a refund.

GEICO says in a statement that its refund policy is geared to “relief based on the full policy term.” The company says it won’t cancel policies for nonpayment. It says its actions “should allow our customers a smoother transition to normalcy.”

Here are steps you can take if you aren’t happy with the refund or response from your auto insurer. 

Call to ask for an adjustment

The first step is to call your insurance company to ask for a refund on your policy, Birnbaum says. You may be unlikely to see a refund of more than 15%, but consumers who are driving less in the pandemic should ask for a rate reduction based on their lower mileage, he recommends. 

Drivers who log less than 5,000 miles a year could save as much as 30% compared with those who drive 15,000 miles a year, according to a study in 2016 from Insurance.com. 

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Shop around for a new policy

If you don’t think your insurer provides enough relief, you could shop around for a new policy, Birnbaum says. Though the typical refund is 15%, some insurers offer more, such as State Farm’s 25% refund. 

Complain to the state 

Because insurance is regulated on the state level, you should take your complaints to your state insurance department, Birnbaum says. Only California and New Jersey have ordered auto insurers to provide premium refunds to their customers, Birnbaum says. Consumer complaints could spark additional state insurance regulators to take action. 

This article originally appeared on USA TODAY: Coronavirus: With less driving, should insurers give bigger discounts?