With most of America’s personal autos parked as owners “shelter in place” and limit social contact because of the coronavirus pandemic, many insurance companies have returned billions in partial premiums for policy periods that will end on May 31.

On the face of it, these actions appear to be a reasonable industry response. Miles driven are significantly down, generally ranging between 30% to 40% nationwide. While reduced premiums will come as welcome relief to policyholders, recent studies suggest that the insurance industry could see an unintended (and unanticipated) consequence - increased crash rates and unexpectedly high severity. In other words, having fewer drivers on the road does not directly translate to proportionately lower crash numbers.

First Studies Find More Crashes Than Expected

Early reports are concerning. Officials from several states describe instances of drivers using wide-open highways to flout speed limits and traffic controls. The results are significant:

• The Georgia Department of Transportation says that although traffic volume was down at least 30% at one major highway interchange during the past 30 days, the number of crashes has remained roughly the same as the pre-pandemic period. Statewide, 125 people died on roads during March 2020, compared with 143 during March 2019. Although this represents a 12.6% decrease, vehicle volume dropped 44% during that same period.
• Minnesota law enforcement officials report a significant spike in fatal crashes between March 16 and April 7: 28 crashes and 24 deaths, up from 12 crashes and 13 fatalities for a similar period in 2019. In contrast, vehicle volume throughout the state is down nearly 50%.
• Texas Department of Transportation preliminary statistics show that 241 people died on that state’s roads during March 2020, compared with 305 during the same time in March 2019. This reflects a 21% decline; however, Texas motorists are now driving roughly half the miles they were a year ago.
• In New York City, miles driven between March 2 and April 8 plummeted by 84%. During that time, six drivers and motorcyclists died on that city’s roadways. This represents a larger number than we saw for the same period in four of the past five years.

One early contributing factor could be that the coronavirus has shuttered court systems and forced changes in law enforcement protocols. Concerned about further clogging backlogged courts with traffic-related violations, many in law enforcement are consciously choosing not to write lower-level speeding tickets. Beyond that lies a more fundamental and practical reason: Traffic stops involve social interaction, which in turn puts the officer at risk for infection. Writing fewer traffic tickets helps keep officers healthy and available for other more emergent tasks brought on by the pandemic. Such tasks include responding to increased numbers of domestic disturbance calls, enforcing social distancing regulations, and securing public spaces to prevent large groups from congregating.

Anecdotal evidence suggests at least a few motorists are noting the police distraction and pressing the accelerator in response. Some cities report increased instances of street racing. Others say they’re seeing more solo crashes. And, in what may be the most extreme example of all, earlier this month an Audi A8 sedan reportedly zoomed from Midtown Manhattan to Redondo Beach, CA in less than 27 hours.

Unknown Consequences and Insurance Challenges

These statistics reflect a small sample and may not portend a national or enduring trend. However, at this early juncture there’s a possibility that the crashes occurring during these unprecedented times are more frequent than might be expected and, in many of those instances, more serious as well.

No one is suggesting that insurers halt or reverse the billions of auto premium returns, at least that we are aware. Many policyholders are facing financial hardships as the COVID-19 continues to wreak havoc on the American economy. Insurer loss costs are likely to remain lower than usual as long as travel restrictions remain in place.

However, the extent to which loss costs actually drop during this pandemic is an unknown and may be less than initially thought, particularly if crash rates remain disproportionate to the diminished number of miles being driven. For an industry used to dealing with uncertainty, the challenge is not unique but nevertheless surprising and unsettling.

Endnotes

1. Atlanta Journal Constitution, 4/09/2020.
2. KSTP.com, 4/11/2020.
3. Houston Chronicle, 4/13/2020.
4. Steetsblog USA, 4/09/2020.
5. New York Times, 4/11/2020.