You have seen the commercials. Lower traffic during these times means lower insurance claims. And Insurance companies are giving back. But insurance regulatory filings and financial statements show there is more to the story.
This spring, when government orders forced businesses to cut back or close and workers to stay home, many companies reduced their advertising. The only companies left to buy airtime seemed to be those that delivered food or sold auto insurance. The car insurance theme has been: we are in this together…so we are giving back. They are cheering their own generosity, part of their never-ending effort to improve their reputations. However, it is important to remember, they are spending your premium dollars to get the word out.
Everything insurance companies do: paying claims, paying investigators, paying lawyers or even paying for advertising that paints them in a favorable light, it all comes from your premium payments. Now, with less drivers on the roadways and less crashes, they are awash in cash. But the reality is, claims have dropped so much that the insurers can afford the refunds. The Chicago Sun-Times published a review of the numbers on Sunday, July 6, 2020. Reporter Stephanie Zimmerman cited that refunds ranged from 15% to 20% of a monthly premium (typical refunds were limited to just two months of payments). But accident claims for some companies are down 60%.
The consumer federation estimates the springtime refunds from car insurers should have been closer to 30%. And it’s urging that refunds be continued this summer as many Americans are still working from home, driving less — and getting into fewer accidents that insurers have to pay claims for.
When four other states mandated refunds, the Illinois Department of Insurance did not. Nothing more than a suggestion. As a result, Illinois drivers are still being left behind. Because most companies stopped the refunds in May even though traffic continues to lag behind normal trends. Keep in mind: insurance companies calculated the premiums they charged you based upon historic traffic and crash data. They gather enormous information on how many crashes happened, how much they cost, how many injuries happened and how severe they were.
Insurance is expensive. Illinois law requires that drivers carry insurance to cover injuries that might result from a crash. We have advised our clients for years that: the best insurance you can get against other drivers is a good, full-coverage insurance policy. But it does not mean that Insurance companies generously do the right thing. They do not profit from being generous. And it takes a lot to get them to do the right thing.
That’s why we are reminding our clients and our friends: you still need a good lawyer to have a fair fight with an insurance company. Everyone here is glad that traffic is down. It is genuinely wonderful that there are less fatalities and catastrophic injuries thanks to less driving being done. But when crashes do happen, the insurance company is not going to generously make you or your loved ones whole. Even when they boast about giving money away, it’s because they’re seeing massive profits. If you have questions about a crash or injuries, please give us a call.