The companies that are doing it of course are advertising that they are discounting premiums for car insurance because, well right now people are driving less because of travel restrictions and of course, insurance companies are you FRIEND and of course as good neighbors they want to help those that can’t afford their payments.
And I get the PR, it’s a fantastic excuse to advertise and make your company look like a good corporate citizen and build loyalty or earn new customers.
But these are INSURANCE COMPANIES we are talking about. You know the same companies that will happily take your premium but fight tooth and nail to not pay your hospital bill leaving you on the balls of your ass.
So what’s the REAL calculus behind this move? Have they calculated it makes better business sense to accept lower premiums than customers going broke and canceling and just driving without insurance which could be bad for business? I do buy the less driving because they can afford to do this if there are less claims.
Is there something in the Stimulus package that encourages insurance companies to do this?
Or is there another calculation I’m completely missing?
Sorry these are insurance companies we are talking about. I don’t trust them as far as I can throw them. There’s gotta be another agenda behind this especially with the Life Insurance claims they must have to pay out right now.
well, for the auto insurance places they’re just trying to hang on to customers that aren’t driving much
I mean if you’re stuck inside only going out once a week for food … why pay 50-100 a month for insurance when you can not use the car for a bit and use the money your saving on gas and insurance for an uber round trip once a week or public transportation?
And if things get back to where people are driving full time well hopefully they remember how nice the company was to them in their time of need
AAA did the same thing in the depression after they lost 90 percent of their business and recovered just enough to stay alive until after the war … its one of few times insurance rates went down but insurance wasn’t mandatory back then either …
As you mentioned, some companies have judged that the PR value of announcing a discount in difficult times is worth the lost income. With fewer claims to process, they are still going to make a profit anyway, in all likelihood.
Auto insurance is a highly competitive business. Once one company announces a discount, the others have a strong incentive to do the same, lest they lose customers.
Also, the impact of life insurance is probably fairly small. Most COVID 19 deaths are amongst the elderly, who often don’t have large life insurance policies. And the number of COVID 19 deaths is still a relatrively small share of all deaths.
I’m with USAA and it is member owned so they share the profits.
Uber his been among the most clever of all. Since it lost 90% of it’s gig workforce and customer base, it’s been running ads thanking their customers for NOT using Uber. Smart.
They can offer lower rates right now because fewer people are driving right now. So they’ll lure people away from their current insurer, who can’t change rates mid-policy period, with artificially low rates and say “Ha-Ha! We totally beat your old company’s rates!” When people start moving around again the rates will go back up to normal. But who cares, they got some of your money rather than none of it.
And there’s a HUGE difference between health insurance, auto insurance, and life insurance. Totally different animals, with totally different reasons for not wanting to pay.
Primarily this I think. People will be reviewing all their expenses. People are driving less, the cost of car insurance is an annoyance to a lot of people, and it’s never been easier to price compare and switch insurance.
I’m sure they aren’t giving away all the extra profit they are predicting.
Apparently a lot of two-car couples, who previously NEEDED two cars when they both commuted to work, are now working from home, and just driving to the store once a week, so they are suspending the policy on one of their cars, and keeping coverage on only one car active.
This is halving the amount of money insurance companies are getting from those couples.
By offering discounts, and retroactive rebates, companies are hoping that people will keep both policies active. This way, the company might get only 60-75% of what they previously got from that couple, but it’s better than 50%.
At least, this is what my agent told me.
My car insurer (AAA) just emailed me that I’d be getting a 20% premium refund for the time my policy was in effect from March 16th to May 15th.
I did not ask for a refund, nor did I expect one. Thanks, AAA!!
It’s a lot more expensive to get new customers than retain the ones you already have. I think a lot of businesses learned their lesson from the last recession, where they automatically went “You can’t pay? Get out of here then!”
I think this is close to the real answer. Some insurance companies, including some very large ones, are member-owned (aka “mutual.”) They would be required to distribute excess profits back to policyholders, so it makes sense for them to do it right now as a rebate.
The corporate insurance companies follow suit to remain competitive.