A proposed class action accuses GEICO of “unfairly profiting from the global COVID-19 pandemic” by continuing to charge excessive premiums for car insurance despite a dramatic decrease in driving and driving-related accidents.
Filed against GEICO Casualty Company, GEICO Indemnity Company and GEICO General Insurance Company, the lawsuit out of Illinois claims auto insurance customers have paid “unconscionably excessive” premiums during the COVID-19 pandemic despite an overall drop in driving due to statewide social distancing and stay-at-home measures.
Although one report conservatively estimates that drivers are owed at least a 30-percent refund for excessive premiums paid between mid-March and April, the “GEICO Giveback” program—the defendants’ purported COVID-19 relief offer—provides a mere 15-percent discount for only new and renewal auto insurance policies, according to the case.
“The company’s ‘GEICO Giveback’ program is woefully inadequate to compensate for the excessive premiums that customers have paid as a result of COVID-19,” the complaint argues, alleging that GEICO has “scored a windfall” instead of issuing adequate refunds during a global health crisis.
The lawsuit notes that Illinois, like many other states, issued a statewide stay-at-home order on March 21, 2020 in response to the worsening pandemic. With some exceptions, the order mandated that “[a]ll travel, including, but not limited to, travel by automobile, motorcycle, scooter, bicycle, train, plane, or public transit, except Essential Travel and Essential Activities as defined herein, is prohibited,” according to the suit. Though the stay-at-home order was originally scheduled to remain in place until April 7, Governor J.B. Pritzker extended the order until April 30 and again until May 29, the lawsuit explains.
Though many businesses have suffered as a result of the COVID-19 crisis, auto insurers such as GEICO have benefited, with the auto insurance industry in general standing to score a windfall from the pandemic due to substantially fewer insurance claims, the case alleges. According to the complaint, the Illinois State Police reported that between April 1 and 26 alone, statewide car accident rates dropped by more than half compared to 2019, while a GEICO submission to Ohio regulators estimated that the insurer’s claims rates declined between 25 and 50 percent.
The case argues that given the decline in driving and auto accidents, the premiums charged by the defendants during the pandemic have been “unconscionably excessive.” Because the rates charged by auto insurers such as GEICO are intended to cover expected future claims and expenses “extrapolated from historical data,” the assumptions underlying insurers’ rates during the COVID-19 crisis became “radically incorrect overnight,” the complaint says.
The lawsuit cites a recent joint report by the Center for Economic Justice and the Consumer Federation of America, stating:
“When roads emptied, the frequency of motor vehicle accidents and insurance claims dropped dramatically and immediately. The assumptions in insurers’ rates covering time-frames from mid-March forward about future frequency of claims became significantly wrong when the roads emptied because of Stay-At-Home orders and business closures starting in mid-March. The then-current rates became excessive not just for new policyholders going forward, but also for existing policyholders whose premium was based on now-overstated expectation about insurance claims.”
According to the report, at least a 30-percent premium refund would be required to offset the “unfair windfall” gained by GEICO and other insurers between mid-March and the end of April.
Instead, GEICO offered customers its “GEICO Giveback” program, which provided a 15-percent refund on personal auto insurance premiums for new customers or those who renew their policy during the applicable time frame, the suit says. More specifically, the program applies only to those who newly purchase or renew a six-month policy between April 8, 2020 and October 8, 2020, or a 12-month policy between April 8, 2020 and October 7, 2021, the case explains.
As the lawsuit tells it, however, GEICO’s discount program is inadequate given it “does not apply at all” to excessive premiums paid for customers’ previous policies and reaches “nowhere near” the 30-percent average refund benchmark estimated to be sufficient.
According to the case, although GEICO’s program was met with “immediate criticism,” the insurer has falsely claimed it has provided customers “substantial and full relief” despite failing to disclose the amount it has retained for itself.
“GEICO does not disclose that its program does not, in fact, fully pass the company’s saving on to its customers, and GEICO does not disclose the amount of its excessive profits,” the complaint charges.
The lawsuit estimates that thousands of Illinois policyholders have been injured by GEICO’s alleged refusal to issue adequate refunds and looks to represent all residents in the state who purchased personal automobile, motorcycle, or RV insurance from GEICO that provided coverage anytime since March 21, 2020.
ClassAction.org’s coverage of COVID-19 litigation can be found here and over on our Newswire.