If fewer people are driving, shouldn’t car insurance be cheaper?

We received an unexpected surprise via email this week from USAA, the company we use for a variety of insurance and financial services. Unprompted by us, they indicated that we would be receiving a significantly increased rebate on our automobile insurance. When you don’t have an accident all year, they generally send you a small rebate, but this one was orders of magnitude larger than what we typically receive. The reason? People are driving so much less during the coronavirus lockdowns that far fewer of their customers are getting into accidents and filing claims.

I’ll confess that I was shocked. There was nothing compelling them to do that. They could have just pocketed the premiums everyone is paying and racked up a tidy profit for the quarter. But instead, they mentioned how everyone was being impacted by the pandemic and they simply wanted to do the right thing. When I started checking around, I found this article from David Lazarus at the Los Angeles Times, who has been asking the same question of all the major insurers. It turns out that USAA isn’t the only company exhibiting such generosity, but not everyone in the industry is following suit.

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