Recently class action lawsuits have been filed in Nevada against ten major auto insurers over premiums charged during the pandemic. The suits claim that insurers failed to account for a drop in driving and auto accidents, and that rates should have been adjusted accordingly. While acknowledging that some insurers dropped rates and offered some refunds, the suits are claiming that the reduced rates weren't sufficient and violated state regulations against excessive premiums.
Suits have been previously filed in Illinois for the same reason; with belief that the drop in traffic and accidents during the course of the pandemic did not result in a large enough decrease in premiums to the insureds, netting the insurance industry millions of dollars in extra profits.
The suits highlight a large misunderstanding about insurance and how it is rated. A drop in exposure for a few months, or even a year, in general isn't long enough to affect rates substantially. There are always hail storms, floods and other types of other than collision losses, and while accidents may have declined in some areas, other areas reported more severe accidents because people were driving faster than normal since fewer people were on the road. Because these suits are apt to generate a lot of attention, we asked the board members to weigh in on this issue.
Board member Loretta Worters agreed with such misunderstanding, pointing out that rates are not looked at for just a few months. For example, later on in the pandemic, people were going out, and there was more speeding and related crashes. Diane Richardson seconded that thought.
Bill Wilson had similar experiences in his population area of 50,000 saying that by his observations traffic has not decreased, and that a number of retired neighbors are going out for drives just to get out of the house.
Loretta also pointed out that while some areas had a drop in mileage that it varies by city or jurisdiction. Essential workers have been on the road with as much frequency as before the virus set in. Commercial vehicles are still on the road and some states are fully open.
Many essential workers, especially doctors, nurses, and other medical personnel, are working longer hours, meaning that they are driving while tired which may also lead to more accidents. It is well known that driving while drowsy can be as dangerous as driving under the influence.
There are so many factors that can impact losses one way or another that, again, all that matters is what the data says. Carriers weren't obligated to make any refunds, and there are many years where carriers pay out more in claims than they take in. While insurance departments encouraged carriers to provide refunds, many had done so proactively without any requirement to be generous.
Editor's Note: The National Safety Council is reporting that despite fewer people driving on the roads through 2020, deaths by motor vehicle increased by 8% oer 2019. While miles driven dropped by 13%, preliminary estimates on the rate of deaths over the previous 12 month period came in at a 24% increase. With fewer people on the roads, speeds increased, as well as distracted driving and driving while impaired. Earlier articles throughout the year indicated that people assumed there were fewer police on the roads monitoring speeders, so some took advantage of it. The council has made several recommendations to reduce road deaths as seen in this article: National Safety Council Article.