(The Center Square) – Massachusetts Attorney General Maura Healey's office found that in 2020, when most people were not commuting daily to and from the office, Massachusetts drivers overpaid for auto insurance by nearly $700 million.
"People drove less, and this means they got into fewer accidents, and that means that insurance companies paid out a lot less than they expected to repair cars/property," Jeff Moriarty, executive director of Hoffman Center for Business Ethics at Bentley University, told The Center Square. "The premiums they charge are based on accidents per mile, and many fewer miles were driven than they expected, so there were fewer accidents."
Both consumer rights groups and the attorney general's office are seeking refunds to drivers or reductions in current premiums.
Janelle Hardiman, director of community relations at Massachusetts Office of Consumer Affairs and Business Regulation, told The Center Square that insurance premium relief measures nationwide generally shaved 15% to 25% off customers’ premium payments for one or more months in 2020 and returned $14 billion to policyholders, according to the Insurance Information Institute.
Throughout the pandemic, the Massachusetts Division of Insurance also encouraged carriers and agents to work with consumers to adjust the limits of compulsory coverages, drop optional coverages, or modify deductibles to better reflect each individual’s situation. Many insurers also provide low-mileage discounts depending on how a consumer drives their vehicle.
Healey's report found that many companies did offer reductions in premiums, but the reduction was less than one-third of what it should have been. According to The Boston Globe, a statement from Healey's office said she was disturbed that insurance companies were making a windfall in profits while so many families are struggling financially.
Moriarty said it stands to reason that insurance rates will go down if people are driving less. As companies evaluate and adjust their own rates, market competition will provide an incentive for companies to lower their prices. In situations such as these, companies know they can’t get away with charging rates that are too high. They will preemptively lower their prices to make sure their customers aren’t poached away.
Even with market reductions, some still feel the pandemic relief was inadequate. Still others don't find anything unfair or unethical in insurance companies' practices.
"Do companies owe anything to Massachusetts drivers, because we all drove less?" Moriarty said. "I don’t think so. They are providing us the exact same product that we agreed to buy from them – coverage if we get into an accident. It’s just that, collectively, we are getting in a lot less accidents."
While companies that sell auto insurance in Massachusetts can set their own rates, the rates are reviewed by the insurance commissioner to make sure they aren't excessive.
"The Massachusetts Division of Insurance (Division) remains committed to ensuring that rates are fair and actuarially appropriate," Hardiman said. "As always, the Division proactively addresses insurance issues impacting consumers of the Commonwealth, and as it continues to collect and analyze data, it is prepared to use its arsenal of regulatory tools for the benefit of consumers."