Risk tolerance is at the heart of an insurance policy. A 17-year-old male with his own car — there’s a high potential for an insurance claim and a higher premium to match. Drivers at home nearly 24/7 due to a pandemic and Safer at Home order — there’s less chance for a claim.
Based on that premise — and the severe economic downturn COVID-19 caused as businesses closed — insurance companies have sought out different ways to meet the needs of both their personal and commercial line customers.
“When this crisis hit, we immediately recognized customers directly impacted may suffer financially,” says Jill Wagner Kelly, president of Integrity Insurance in Appleton.
In April, Integrity announced its personal auto policyholders would receive a 25 percent payback on the premiums paid for the months of April and May. The total credit impact was about $25 million throughout the 13 states where Integrity and its affiliate partner, Grange Insurance, operate.
“When fewer drivers are on the road, fewer accidents occur,” so the decision to return some of their premium made sense, Kelly says. “The dedication to our mission of providing peace of mind and protection during life’s unexpected events has never been stronger.”
Integrity is not alone in providing personal auto insurance customers with a break during spring and early summer. Insurers used the decrease in auto claims to cover the funds sent back to policyholders.
At Secura Insurance in Fox Crossing, the organization provided a special policyholder dividend to eligible auto policyholders, with more than $2.5 million returned to customers, says senior vice president and chief underwriting officer Marty Arnold.
“We know everyone has been impacted by the situation in their own way, and we’re always considering ways we can support our customers and our communities,” he says. “We worked with our agents to make mid-term adjustments for premiums based on policyholders’ reduced exposure.”
Acuity in Sheboygan took time to assess what a plan for its customers looked like before implementing relief for its policyholders, settling on a 5 percent across-the-board discount to auto policyholders, says Melissa Winter, vice president of business consulting.
“We wanted a broader scope for our plan and didn’t want to rush to a one-time drop, which now you see some insurers going back to clients since their initial plan wasn’t broad enough,” she says.
When determining its rates, Acuity also uses miles-driven data in customers’ calculations, so if the pandemic keeps people home, Winter says more savings are coming.
“Customers who drive fewer miles than expected will see an additional drop in their premiums of around 2.5 percent, bringing their discount on their full annual premium to 7.5 percent,” she says, adding Acuity provided nearly $20 million in relief for its personal line customers.
No quick answer
While insurers, for the most part, found a one-size-fits-all solution to help their auto policyholders, that wasn’t the case for their commercial policyholders. All businesses carry insurance, but the type of insurance needed can differ dramatically depending on its size and industry. And with many businesses closed or bringing in less income, insurers realized commercial clients needed help, too.
Arnold says Secura worked with customers to provide payment accommodations ranging from grace periods and longer payment terms to premium deferrals. “We worked with our agents to make mid-term adjustments for premiums based on policyholders’ reduced exposure,” he says.
Acuity also treated each account on an individual basis, Winter says. “We know that businesses have been greatly impacted by shutdowns and slowdowns, with some more than others,” she says.
Winter gave this example: If a trucking company determines it can idle one or more vehicles due to losing a customer or seeing reduced overall business, Acuity will remove coverage for those units not being used. “Our commercial market was hit in different ways, and we want to respond to the direct needs of each policyholder,” she says.
Acuity will return some of each company’s premium at audit if their exposure amounts end up being lower than their policy estimates because of the impact COVID-19 had on their operations, Winter says. “In commercial lines, the premium we charge after audit reflects the actual exposure, ensuring that what customers pay is fair,” she says.
For Integrity’s BOP (Business Owners Policy) customers, a 20 percent payback of the premium for the months of April and May was returned, Kelly says.
“The COVID-19 pandemic has created a challenging and uncertain time for many small businesses. This allowed Integrity to give back to those customers during this difficult time,” she says, adding Integrity is closely monitoring the situation and may provide “meaningful” actions, if necessary, to help policyholders.
While insurers that cover cars quickly rolled out plans to return money to policyholders due to changing habits during the pandemic, Jewelers Mutual Insurance Group in Neenah needed to take a different route. The world’s largest insurer of jewelry, offering commercial and personal policies, did not see its risk exposure decrease. Rather, the risk exposure increased.
“In our business, there is a heavy crime focus. When Safer at Home orders were put into place and people left the stores, the criminals didn’t get that memo — it actually exposed our customers to more risk,” says John Fierst, vice president of commercial lines for Jewelers Mutual.
To help commercial customers keep their inventory safe, Jewelers offered to cover the cost of moving the jewelry to and from a secure, off-site location, such as a bank vault or a Brinks facility. “By making that move, we reduced that risk of theft,” Fierst says.
The insurer also realized many of its customers were hit hard financially and put in a grace payment period from March 1 to July 1, says Jessica VandenHouten, brand communications manager for Jewelers Mutual. If a policyholder is in a state that is still shut down, the grace period has been extended.
“Once our policyholders have money flowing in again, they could begin paying for their coverage again,” Fierst says. “We don’t have many claims, but when we do, it’s a big one.”