CPAN calls on DIFS to hold Progressive accountable and ensure that consumers receive appropriate auto insurance premium refunds
CPAN calls on DIFS to hold Progressive accountable and ensure that consumers receive appropriate auto insurance premium refunds
Insurance giant saw windfall of $800 million at height of the pandemic
LANSING, Mich.—(Aug. 26, 2020)—Noting that auto insurance giant Progressive saw a windfall of $800 million in increased profit while the pandemic raged in Michigan, CPAN today called on the Department of Insurance and Financial Services (DIFS) to ensure that the excess premiums charged by Progressive are returned to its customers.
In a letter to DIFS Director Anita Fox, coauthored by CPAN President John Cornack and national insurance expert Douglas Heller, CPAN outlined its review of actuarial documentation filed by Progressive Insurance—Michigan’s second largest insurer—with DIFS, as well as the company’s financial statements, in which it announced incredible profit increases.
Progressive refunded consumers 20 percent of their premiums in April and May due to reduced driving and fewer claims filed during the pandemic. However, even after taking that refund into account, Progressive saw its after-tax net income increase over the second quarter of 2019 by more than $800 million to $1.79 billion, an 83 percent increase. Those profits continued to balloon into July, when Progressive saw a 111 percent increase in net income compared to July 2019.
“We appreciate that DIFS and Director Fox have undertaken efforts to provide Michigan consumers with full and fair refunds on their auto insurance premiums,” Cornack said. “But from our review, it’s clear that Progressive shorted its customers while raking in enormous profits during the height of the pandemic. We’re calling on DIFS to hold Progressive accountable and ensure that consumers received appropriate premium credits.”
The letter outlined three main reasons for why Progressive’s refund was insufficient.
Progressive failed to document the full scope of the loss reduction during the pandemic or sufficiently justify the alleged offsets to its premium credits. Progressive relied on comparisons between March 2020 and March 2019 as well as between March 2020 and February 2020 when calculating the refund. Given that Governor Whitmer’s stay-at-home order was issued on March 23, with only one week left in the month, March was not representative of the exposure base and risk of loss for the period that was the subject of the refund. In addition, Progressive did not justify how it calculated additional reductions to the refund, including offsets for unpaid premium and staff retention. In its July 2020 financial report, Progressive acknowledged that it had substantially overestimated the impact of expected unpaid premiums after a “reevaluation.”
The company gave back less than its own actuary acknowledged was indicated. Progressive determined that the change in its exposure base justified a return of 22.8 percent of premium per month to its customers. Yet, for reasons unexplained in any of Progressive’s submissions, it determined to only credit 20 percent of monthly premiums to Michigan drivers.
Progressive returned $16.9 million to Californians in June but $0 to Michigan drivers for that month. In its actuarial report provided to DIFS indicating that no refund was due in Michigan for June, Progressive asserted, without any additional data, that claim frequency in June increased compared with the week of March 8 after seasonal adjustments. Why they did not compare it with claim frequency from June 2019 is not clear, nor is it clear why Michigan’s claim frequency was so out of step with the rest of the nation, where Progressive “continued to see a significant decrease in auto accident frequency due to restrictions put in place to help slow and/or stop the spread of the novel coronavirus,” as reported to shareholders.
“We couldn’t have expected Progressive, nor any auto insurance company, to anticipate the impact that the COVID-19 pandemic has had,” Heller said. “But it is clear that Progressive reaped a financial windfall due to fewer claims while driving was significantly reduced. It is our view that the windfall should be returned to customers, and it is the responsibility of DIFS to ensure that Michigan consumers get the refund they are owed.”
You can view the letter to Director Fox here.
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CPAN is a broad coalition of health care providers, patient advocates and accident survivors who are committed to preserving Michigan’s model auto no-fault insurance system and ensuring that all Michigan drivers have fair and affordable insurance rates. For more information, please visit www.CPAN.us.
PRESS CONTACT
Scott Swanson
Moonsail North
517.582.0084