GEICO Corp. has offered the second-largest reduction in auto insurance premiums among the biggest private carriers that have provided nationwide discounts to account for fewer miles being driven during the pandemic, but a federal lawsuit and a consumer advocate organization claim it has not done enough to compensate customers.
The Berkshire Hathaway Inc. unit budgeted $2.50 billion in reductions to its auto insurance premiums, which is twice as much as the next two insurers combined, according to S&P Global Market Intelligence data.
But GEICO's discount did not apply to policyholders at the time of the announcement, making the 15% discount available only to new customers, or upon policy renewals. The rest of the companies in this analysis provided refunds, credits or discounts to policyholders on their rolls at the time of they made the plans public.
A GEICO policyholder in Illinois has sued the insurer, claiming that its discounts were inadequate and failed to make up for premiums the plaintiff called "excessive."
The Consumer Federation of America is not involved in the Illinois case, but has challenged GEICO's plan in California, said Douglas Heller, the organization's insurance expert.
The Insurance Information Institute is also encouraging drivers who do not believe their rates properly reflect reduced auto use to contact their insurers for discounts, or shop around for policies that will. The market environment has created a favorable market for drivers, spokesman Michael Barry said.
"The auto insurance industry is very competitive and very responsive to customer inquiries," Barry said. Telematics-based policies that price premiums based on driving miles are widely available, he said.
However, having the option to shop around does not properly remedy special discounts like GEICO's because its plan creates a barrier to deserved rate reductions, according to Heller.
"If you were to shop around, you might lose your refund from GEICO, go to another company and they've already given theirs out," he said. "You lose out on your right to credits for overpayment during the spring."
GEICO did not respond to a request for comment on the lawsuit.
Even companies that offered credits or reductions to current policyholders have ended the discounts without taking into account ongoing depressed driving nationwide, Heller said.
State Farm Mutual Automobile Insurance Co. announced the most generous total-dollar rebate, credit or premium reduction program among those with national initiatives, with a $4.20 billion impact. Following GEICO on the table are Progressive Corp. and Allstate Corp., which are each offering customers a total of $1.00 billion.
In 2019, State Farm held the top spot in Illinois' private auto insurance market by direct premiums written, followed by Allstate, Progressive, then GEICO.