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New Data Suggests Coronavirus Windfall for Texas Auto Insurance Companies

Texas Department of Insurance Must Take Action to Ensure Texans are Not Overcharged
For Immediate Release

AUSTIN —- Six leading consumer advocacy groups joined together today, calling on the Texas Department of Insurance to take action to ensure Texas families are not charged excessive automobile insurance during the COVID-19 crisis. Texas Appleseed, TexPIRG, and Texas Watch encouraged the department to conduct a comprehensive review of auto rates and use existing statutory authority to disapprove any rates found to be excessive. 

Texas Appleseed released a new policy report entitled COVID-19 Pandemic Should Not Be Profit Boon for Texas Auto Insurers detailing how many auto carriers have fallen short on refunds and credits as Texans continue to drive less during the COVID-19 pandemic. 

The report found:

  • Auto accidents continue to decline compared to the same period in 2019. Average weekly declines in accidents ranged from 26% to 59%.  The average weekly decline over the study period was 43%.

  • Nearly one in three of the top 40 auto insurers in Texas is offering no credit or refund to customers, despite the drop in travel and accidents. As a result, many insured Texans are getting no relief in this time of reduced auto claims and extraordinary financial hardship.

  • Companies that often serve the lowest-income Texans are the least likely to offer any rebates. Among the nine companies in the top 40 identified as nonstandard providers—generally those serving higher risk drivers or drivers with no credit or a low credit score—only one offered any relief or credit to customers. 

  • Among those insurers offering rebates, amounts vary substantially—from a one-time fixed dollar amount or a two month 15% credit, to 20% or more over a three-month period, coupled with promises of future price reductions upon policy renewal. Some companies are offering discounts only upon renewal, which is concerning, as it undermines fair market competition—requiring people to renew with the same company to receive premium relief applicable to past coverage.

 

“Though some market participants are doing the right thing and offering appropriate credits and refunds to customers, many are not and should be held accountable,” said Ann Baddour, Director of the Fair Financial Services Project at Texas Appleseed. “The pandemic should not be exploited by any auto insurers to generate excess profits at the expense of struggling Texas families.”

 

With people driving far less during the pandemic and fewer miles traveled on our roads, carriers face far less risk. Under the principle of risk-based pricing, less risk should translate into lower rates for Texas families. Some insurance carriers have stepped forward to offer refunds, and the consumer groups applauded them for taking that action. But one estimate by leading actuaries and economists shows that the reductions should be twice as much as that promised to date. Texas auto insurers are getting a coronavirus windfall of between $600 million and $870 million based on the new study by Texas Appleseed. Texans pay more than $20 billion in automobile insurance premiums each year. 

 

“People have plenty to deal with right now, and haggling over their auto insurance for a car they aren’t driving shouldn’t be one of them,” said Bay Scoggin, Director of the Texas Public Interest Research Group. “Having an individual mandate means the state needs to actively protect consumers from price gouging—just like it has done with consumer product goods. Insurance should be no different.”

 

At a time when Texas families are facing record unemployment and food banks are seeing long lines of those needing assistance, every dollar saved in automobile insurance premiums is a dollar that can be better spent on household necessities. The Texas Insurance Code provides the Commissioner with the ability to disapprove a rate that is currently in effect after a hearing. The statute also provides that rates should not be “excessive.” One of the fundamental duties of the Texas Department of Insurance is to "protect and ensure the fair treatment of consumers." Accordingly, the groups called on the commissioner to take action with respect to carriers who have offered no reduction, or have offered insufficient reductions in their rates. 

 

“We need the Insurance Commissioner to take immediate action to protect Texas consumers. He has the authority under the law to disapprove excessive rates, and he should use it. Texas families are hurting right now, and money saved on their insurance bill can help them keep food on their tables during this terrible pandemic,” stated Ware Wendell, Executive Director of Texas Watch. 

 

As drivers continue to log fewer miles during the pandemic, the Department will need to continue to monitor rates and order reductions wherever necessary to ensure they reflect actual risk. 

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