Insurers on blast for billions in the bank

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The latest round of refunds is coming to drivers in Michigan, who are getting $400 back for each vehicle they own.

“Billions in surplus funds should not be held by insurers to invest for their own profit or be conditioned on renewal of a policy,” Gov. Gretchen Whitmer wrote in a letter last month.

Whitmer had accused the Michigan Catastrophic Claims Association — which charges drivers an annual fee to cover the cost of personal injury claims — of holding on to $5 billion more than necessary.

The insurance companies that make up the association quickly agreed to part with roughly $3 billion of the surplus. The money will be freed up in early March and distributed to policyholders within 60 days.

While the refund is welcome relief, it's only a one-time deal — meaning drivers in Michigan and across the country will need to look elsewhere for significant, lasting savings.

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Siege continues across the country

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Though it's not the case in Michigan, most complaints in other states are related to overcharging during the pandemic.

When the streets were empty and accidents few, Progressive reported an 82% increase in net income. Geico’s pretax earnings tripled during the second and third quarters of 2020.

Insurance providers voluntarily gave out more than $14 billion in refunds last year, the American Property Casualty Insurance Association says, but many critics aren't satisfied.

“On behalf of consumers, I am out of patience,” California Insurance Commissioner Ricardo Lara wrote in October, giving three of the stingier companies 30 days to "tell us once and for all how they are going to make it right.”

A state analysis found that insurers returned an average of 9% of auto premiums from March to September 2020, but the Insurance Department estimates they should have refunded nearly double that amount.

Washington and New Mexico are also assessing whether drivers got enough money back, and Massachusetts Attorney General Maura Healey has sent several pointed letters to the state's insurance regulator. The conflict has even ended up in the courts, with class-action lawsuits filed this year in Nevada and Illinois.

So can I get free money from my insurance company?

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Unless more regulators step in or the class-action suits succeed, insurers won’t be forced by law to hand out more money than they already have.

Most rebates provided last year were minimal; it was rare to get back more than half a month’s premium. On average, advocacy groups say, insurers shortchanged policyholders $125 per vehicle.

But some companies didn’t issue refunds or cut rates at all unless customers called and asked.

If you haven’t contacted your insurer yet, you might have free cash waiting for you. And with pressure mounting, your provider might be open to reviewing your premium, especially if you’re still driving less than before.

But if your insurance company refuses to give you a pandemic discount, you can try a couple other ways to cut your insurance bill:

Drop optional coverage

Some auto insurance policies include extras that you may be able to do without for a while. For example, can you cut out the option that pays for a rental car while yours is at the repair shop?

Removing these extras can save you a few bucks. Just make sure you’re still meeting your state’s minimum liability coverage and are protected in case of an accident during those trips to the grocery store.

Switch insurance providers

If your insurer won’t give you a break, maybe you can find a new one that will.

Drivers who haven’t done any comparison shopping over the last six months could be overpaying by more than $1,000 per year.

With a free quote-comparing service, you could find a better price in just a few minutes.

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What if I need even more savings?

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If saving on car insurance isn’t enough, here are a few more ways to give your bank account a boost until the economy bounces all the way back.

  • Stop overpaying online. It’s impossible to find the best price on your own when there are thousands of stores on the internet. Try using a free browser extension that automatically applies coupon codes and tracks down lower prices when you shop online.

  • Cut the cost of your debt. If you’ve relied on credit cards throughout the pandemic, expensive interest is bound to catch up with you. A lower-interest debt consolidation loan can fold your balances into a single, lower-interest payment — and help you find freedom from your debt sooner.

  • Invest your spare change. Using a popular investing app, you can automatically invest the “change” left over from everyday purchases. You won't even notice the deposits as you build or round out your investing plan.

Compare insurance quotes and save money

Did you know that you could be saving some serious money just by switching insurance companies?

It’s true. You could be paying way less for the same coverage. All you need to do is look for it.

But don’t waste your time hopping around to different insurance companies. Use a website called SmartFinancial to see all of your options at once.

SmartFinancial will provide you with a tailor-made list of possible policies from all major and most relevant insurance carriers.

About the Author

Sigrid Forberg

Sigrid Forberg

Reporter

Sigrid is a reporter with MoneyWise. Before joining the team, she worked for a B2B publication in the hardware and home improvement industry and ran an internal employee magazine for the federal government. As a graduate of the Carleton University Journalism program, she takes pride in telling informative, engaging and compelling stories.

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