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Car insurers should give more money back to customers, consumer group says

Rate of fatal traffic accidents increasing
Rate of fatal traffic accidents increasing 02:08

Auto insurers have made billions of dollars in profit this year while short-changing customers on promised refunds, according to a consumer advocacy group. 

Allstate, Geico, Progressive and other insurers vowed in April to return a portion of monthly premiums to motorists, reflecting a sharp decline in driving because of the coronavirus pandemic. Yet while the companies kept their word, they have typically returned less than half of one month's payment to homebound drivers, according to a survey released Wednesday from the U.S. Public Interest Research Group that reviewed refunds in ever U.S. state.

"What they offered is not enough," said Jacob van Cleef, a consumer watchdog associate at U.S. PIRG. 

Customers should not have to pay full monthly premiums when so many drivers are unemployed and stuck at home, consumer advocates have argued, pointing to the decline in people on the road. Instead, insurers should offer another round of much larger refunds considering that they're still charging customers and generating huge profits, the groups said.  

The Consumer Federation of America noted that Geico made $2.1 billion in profit during its second-quarter of 2020. The company gave its car and motorcycle customers 15% off their premiums between April and October. Geico did not immediately respond to requests for comment. 

California sees 84% drop in fatal car crashes... 02:40

Consumer groups have urged state insurance regulators to force companies into paying adequate refunds. Customers also should join the  fight to push state lawmakers to mandate additional rebates, van Cleef told CBS MoneyWatch. 

"Calling the insurance companies isn't going to make that happen," van Cleef said.

Some insurance holders have already taken the fight to court. 

6 lawsuits

Customers in Illinois filed six separate lawsuits in July against insurers Allstate, American Family, Progressive, Geico and others, alleging the premium refunds were too low. The suit against Allstate — which gave back a total of $600 million to customers by offering a 15% credit for April, May and June — accuses the insurer of falling "far short of the relief that any fair and reasonable actuarial analysis would require." 

Allstate did not immediately respond to a request for comment. Progressive, which gave its customers 20% off their April bill, also did not immediately respond to a request for comment. 

American Family said it has offered three rounds of refunds totaling $500 million. The company is giving customers a 10% discount on premiums until March 2021.

It's unclear if other insurers will roll out additional refunds, van Cleef said. Even if they don't, just knowing that fact is valuable information, he said. 

"After you see how other insurance companies handled their windfall, you can use that as leverage to ask for better pricing from your insurance company or evaluate other insurers if you're considering a switch," he wrote in a report on U.S. PIRG's findings. "How fairly a company has treated its customers during the pandemic may influence you when it's time to shop for new insurance."

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