Michigan drivers overcharged $ 1 billion in auto premiums during pandemic, study finds
(WXYZ) – Michigan drivers were overcharged by more than $ 1 billion in auto premiums in 2020, according to a study by a national consumer advocacy group.
“I know everyone is talking about the harshness of the year for the pandemic,” said Doug Heller, insurance expert and consumer advocate. “But not for auto insurance companies.”
Thanks to pandemic-induced closures and the adoption by many offices of a work-from-home policy, vehicle crashes in Michigan fell last year from 314,377 in 2019 to 245,432 in 2020 , a drop of almost 25%.
Across the country, kilometers driven fell to the lowest level in 20 years, even though drivers continued to pay their premiums in full.
“Our roads were empty,” Heller said. “And if our roads are empty, we don’t cause accidents.”
In response to public and government pressure, insurers reimbursed part of our premiums. But the initial reimbursements didn’t amount to much, according to Steve Gursten, a Farmington Hills-based auto accident attorney.
State Farm’s credit was around $ 20 per month, he said, while Progressive was offering drivers a refund of $ 46 per vehicle. The reimbursement for automobile owners was approximately $ 28.
The average auto policy in Michigan costs $ 3,096, according to thezebra.com, an insurance comparison website. In Detroit, the average is around $ 6,280.
Linda Dillard’s reimbursement made no dent in her premiums.
“I had a whopping $ 60,” said Dillard, who has worked from home for the past eighteen months.
“Most people weren’t driving because most places, most businesses were closed,” she said. “What am I paying for?” “
In their study, Heller and the Consumer Federation of America compared how much insurers earned in premiums last year with what they paid in claims.
They found that nationally, insurers collected more than $ 30 billion in excess premiums. In Michigan alone, they found insurance companies pocketed between $ 1 billion and $ 1.2 billion in excess premiums.
Spread over the 5.8 million insured Michigan drivers, that’s about $ 195 Heller says the Michigan insured driver is due for 2020 alone.
Erin McDonough, executive director of the Insurance Alliance of Michigan, declined a request for an interview on the recent study.
In a statement, she did not dispute the findings of the Consumer Federation of America study, but said that while there had been far fewer accidents in 2020, the severity of those accidents has increased.
Anita Fox, director of the Michigan Department of Insurance and Financial Services, ordered driver reimbursements twice last year: first in May, and then again two months later.
She has not ordered any reimbursement since.
“We don’t see the same glaring disparity, but we recognize the potential,” Fox said.
She points out that while there were nearly 70,000 fewer vehicle crashes in Michigan last year, there were 108 more fatalities.
The more serious the accident, she says, the higher the cost to insurers.
“We believe the cuts were actuarially justified,” Fox said. “That’s not to say we’re unwilling to look at additional data and look at it again. We still do.
Gursten says other states have regulated premiums more aggressively throughout the pandemic.
“You have an insurance commissioner (in Michigan) who is too willing to take the insurance industry at its word,” he said.
After ordering a series of refunds in 2020, the California Insurance Commissioner did so again in March. State Farm gave back an additional $ 400 million to drivers there, but not in Michigan.
In a statement to 7 Action News, State Farm did not dispute the findings of the Consumer Federation of America study, but says its current rates are below pre-COVID-19 levels.
“I think if our insurance commissioner had done what they did in California, we would most definitely get another check from State Farm, Allstate and AAA this year,” Gursten said. “We would have to do it. “
Director Fox hasn’t ordered any refunds since July of last year.
“Would it be correct to say that you are convinced State Farm has not overcharged Michigan drivers?” asked Ross Jones of Channel 7.
“This question is kind of loaded with some assumptions that I don’t feel comfortable with,” Fox said. “I know the reductions based on driving data, our actuaries and staff reviewed were appropriate based on the data submitted.”
Fox said that while other refund orders are possible, none are planned at this time.
Heller hopes Fox will reconsider his decision.
“It’s not enough to say, ‘Well, we stood up for consumers once,’ he said. ‘Their job is to always stand up for consumers because we’re still obligated to buy this insurance product. “
Contact Investigator 7 Ross Jones at [email protected] or at (248) 827-9466.