Like nearly every other facet of life, Michiganders’ driving habits changed drastically during the COVID-19 pandemic.
Unless their jobs were deemed essential in-person, Michigan residents were primarily parked at home for months during the statewide stay-at-home order, and crashes dropped, meaning there was less risk on the roads.
Auto insurance companies began issuing credits or partial refunds to drivers, and on June 1, Michigan’s Department of Insurance and Financial Services made that mandatory.
But some consumer advocates say those entities should be doing more to compensate drivers – and potentially go back to the drawing board for lowering future rates if the coronavirus continues to change how drivers are using their cars.
“They are sitting on this coronavirus windfall, and they need to give it back,” said Doug Heller, a national insurance expert who works with the Consumer Federation of America and the Coalition to Protect Auto No-Fault.
Vehicle travel dipped drastically after Michigan’s stay-at-home order went into effect, and less driving meant fewer crashes. According to statewide traffic crash data collected by the Michigan State Police, there were 13,930 crashes in the state in March – down 60 percent from the 23,088 crashes recorded in March 2019.
Those trends held in April and May as well, with statewide monthly crash numbers down 40 and 52 percent from the same time last year, respectively.
“Extreme reductions” in driving and lower risk for insurance companies prompted DIFS to require Michigan auto insurers to issue refunds or premium waivers. Insurers were required to submit filings to the state detailing the amount drivers would get back, how that amount was determined and how people will get the money.
But those payments aren’t one-size-fits-all. Most major auto insurance companies that operate in Michigan are offering credits or refunds ranging between 15 and 25 percent for April and May, according to an analysis from the Consumer Federation of America.
Michigan has long been known for its highest-in-the-nation auto insurance rates. Come July, Michigan drivers will have the option to choose their desired level of personal injury protection (PIP) coverage as part of an overhaul to the state’s no-fault auto insurance system.
While the new law requires statewide average rate reductions on the PIP portion of auto insurance premiums for the next eight years, individual savings are not guaranteed.
DIFS Director Anita Fox said due to the individualized nature of auto insurance policies, it’s not feasible to come up with a statewide mandate for insurance companies to follow when it comes to COVID-19 credits. Instead, the state is inspecting the methodology each company used to come up with its COVID-19 refunds or credits and issue objections if necessary.
DIFS didn’t want to slow down actions companies were already taking to refund customers who weren’t driving during COVID-19, Fox said.
“We wanted to get it out quickly, but we want to also make sure that that the insurance companies are being fair in how they’re treating drivers,” she said.
Erin McDonough, executive director of the Insurance Alliance of Michigan, said more than 90 percent of insurance companies had already begun issuing refunds prior to the order from DIFS, and encouraged people to reach out to their agents for the possibility of more savings if the COVID-19 pandemic has changed their circumstances.
“There are things that can be done if your needs have changed,” she said. “A lot of companies are doing that one-on-one communication.”
Although the stay-at-home order has been lifted, many businesses remain closed or are still operating in limited capacity due to COVID-19 restrictions, meaning the pandemic could continue to have long-term impacts on individual driving habits.
At least one insurance company operating in Michigan, State Farm, is planning to lower their rates based on projected declines in vehicle miles driven and accidents in addition to the 25 percent credit policyholders received on premiums paid between March 20 and May 31.
The company is planning a 12.7 percent average rate reduction for its 1.1 million Michigan customers and estimates $173 million in savings, State Farm spokesperson Kevin Gamble said.
Heller called the move an initial acknowledgment that moving forward, rates previously approved by DIFS as the state’s new auto insurance law takes effect will likely be higher than they should be under the circumstances.
“Every single company that sells a new auto insurance policy starting July 2 will be overcharging their customers, because we’re just not causing accidents as much as we used to in the pre-pandemic world,” he said.
Insurance companies “have an obligation to adjust since the world has changed, and DIFS has an obligation to ensure they adjust,” he continued.
Consumers with questions or concerns about their auto insurance policy can contact DIFS from 8 a.m. to 5 p.m. weekdays at 833-275-3437 or by emailing firstname.lastname@example.org.
MLive reporter Zahra Ahmad contributed to this report.
COVID-19 PREVENTION TIPS
In addition to washing hands regularly and not touching your face, officials recommend practicing social distancing, assuming anyone may be carrying the virus.
Health officials say you should be staying at least 6 feet away from others and working from home, if possible.
Use disinfecting wipes or disinfecting spray cleaners on frequently-touched surfaces in your home (door handles, faucets, countertops) and carry hand sanitizer with you when you go into places like stores.
Michigan Gov. Gretchen Whitmer has also issued an executive order requiring people to wear face coverings over their mouth and nose while inside enclosed, public spaces.