How Has COVID-19 Affected Auto Insurance?

How Has COVID-19 Affected Auto Insurance?

The pandemic has caused many changes to what was once considered lifestyle norms. COVID-19’s impact on the auto insurance industry has been significant, including its effects on the drivers. The Insurance Information Institute (Triple-I) issued a report in 2020 offering details on these changes.

Here are some of the key findings on how the pandemic has affected auto insurance.

Insurance Claims Surge

Based on Triple-I data, insurance agencies returned $14 billion to customers in payouts for eligible claims during 2020. This rise in claims from the previous year amounted to around 15 percent of the revenue generated by premiums.

While the frequency of property damage dropped by 30 percent in 2020, accident damage was more severe. Traffic analysts have pointed to faster driving speeds as the reason for more violent wrecks.

Ironically, driving has decreased in 2020 due to mass shutdowns of business activity. Some people have been laid off or furloughed due to financial tightening and social distancing reasons. Many small operations have closed due to a lack of business activity. Millions of people are now working from home.

Another irony during the pandemic year has been despite a 12 percent reduction in driving miles, traffic fatalities rose by 4 percent. Faster driving speeds may be attributed to increased tension as a result of the pandemic, as well as people rushing to get to their destinations to the point of prioritizing speed over safety.

More Claims Lead to Higher Rates

Insurance companies are inclined to raise rates when the amount of insurance claim payouts become enormous. These companies are in business to make a profit, but when profits get squeezed by payouts, they increase premiums to make up for the difference.
The good news is, an increasing number of drivers want to keep their insurance rates low, so they practice safe driving behaviors. Following this simple strategy lowers the risks of accidents and traffic violations, leading to a clean driving record with lower premiums.

Digital Monitoring

Before the impact of coronavirus on auto insurance, drivers were already gravitating toward IoT-based technology that connects the vehicle with the insurance agency via wireless transmission. More and more drivers are installing this technology, called telematics, in their cars. This software monitors the driver’s behavior, which is then reported to the insurer. This data is then used to adjust the driver’s premium, as safe and responsible driving triggers lower premiums.

The steady adoption of telematics correlates with the rising popularity of usage-based auto insurance. An Arity study during the pandemic revealed that 58 percent of drivers don’t mind insurance companies monitoring their driving activity with telematics.

Customer Loyalty Grows

A recent consumer study by J.D. Power found that customer satisfaction for car insurance has jumped to an all-time record. Customer satisfaction was rated on a 1000-point scale, in which it hit a peak of 872 as the pandemic unfolded. That makes 2020 the third year in a row when customer satisfaction increased for car insurers.

The study showed that insurers accelerated the claims process from an average of 12.6 to 10.3 days. Over three-fourths of survey respondents said they plan on renewing their plans with their current insurance company.

Insurance companies also got high marks for having personnel available at all times to answer questions. They are also being commended for following through on claims. Customers further approved of direct repair programs (DRPs) with insurer-affiliated shops. Another explanation for rising customer satisfaction could be that the benefits are more appreciated during the pandemic, which has raised stress levels over health and finance.

Many consumers have noticed the coronavirus impact on auto insurance the past year. Even though driving miles are down, claims and fatalities have risen. Meanwhile, customer satisfaction for insurance companies has hit record levels. Talking with an experienced agent will help you understand your coverage. For assistance with all your auto insurance needs, contact the experts at 01 Insurance in Astoria, New York. We are ready to assist you with all your coverage needs today.