Insurance Refunds-Will Other Companies Follow?

Insurance Marketing often involves genius thinking!  From humor to company mascots like lizards, pigs and ducks…we often enjoy being entertained by company advertising.  I know I do.  But sometimes insurance marketing flirts with deception by moving consumers to think something is “special” when most companies offer the same thing.   In other words, the company just wants you to think of their “feature” more favorably.  Why?   So that you’re influenced to buy from them and not the competition.  This could be “New Car Replacement”, “Accident Forgiveness”, “diminishing deductibles”, “Only Buy the Coverage You Need”, etc.

Now, let’s take the latest Allstate announcement about sending out refunds to their insureds.  With the COVID-19 pandemic, people nationwide are driving MUCH less, thus the number of claims will be reduced.  Fewer claims mean insurance companies are seeing their profit reserves growing larger than necessary.
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Since our current premium is based on “normal” driving activity, what happens when life changes our circumstances for a length of time?  Aren’t we entitled to an insurance decrease when there are fewer accidents and claims?   Why YES, you are!  But what will this look like and how will it happen?    And better yet, can we use this as an opportunity for marketing?

​“Let’s send people refunds and make our brand stand out!”

What a genius marketing move!    But here is what consumers do not understand- insurance companies are ALWAYS factoring in changes and trends at each renewal.  Have you ever wondered why sometimes your auto-renewal premium goes up and sometimes it does down?

Unless you have recently added a new car or driver or had an accident/violation, your auto-renewal has about a 50/50 chance of going up or down a little bit.  Why?  Because the claims paid in your ZIPCODE are one of the main factors in the renewal’s premium. So, if these couple of months find insurance companies paying out fewer claims, what do you think you should see at your next renewal (or at least the one after that, depending on timing)?   Yes, a decrease!    That is what happens naturally in the industry. Did you know this?

But what if a company decides not to wait to adjust their premiums at renewals and instead uses the situation as a marketing opportunity? “We’re sending our insureds refunds!”  It sounds so good.  It really does. The reality is this- many people are going to get some money back in one form or another.  But as more companies jump on THIS marketing bandwagon, what normally occurs naturally will now be immediate.

I don’t know if all insurance companies will feel the pressure to send out “refunds” immediately, but if yours does not…..no worries.  You should see a decrease in a future renewal (unless you have an accident, violation, or another factor that counters that decrease factor).  If you do get a refund, then you should probably not expect to see lower rates at your next auto-renewal.

While I love insurance and I love helping people, it is frustrating sometimes to work in an industry where marketing can be manipulative to consumers, yet genius for the company. We hope by providing honest answers, time and time again, you come to know that if you’re in anyone’s “good hands,” it’s ours!