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THE FINE PRINT

Q&A on auto insurance

A tow truck towed a flooded car in Salem in late November.Pat Greenhouse/Globe Staff

Many people say the pandemic has caused them to leave their automobiles parked in the driveway all day as they work from home and otherwise stay put. Could there be another round of discounts coming in auto insurance premiums?

Q. What are the insurers saying about discounts or refunds?

A. I checked the websites of the five largest auto insurers in Massachusetts. I saw no promises of additional discounts or refunds on any of them.

Q. Have those companies provided any relief since the pandemic began?

A. Yes, in the weeks after the state went into lockdown, all the big companies offered discounts. Most insurers discounted premiums by 15 percent for April and May. A few provided slightly higher discounts.

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Q. Did all insurance companies provide discounts?

A. Insurers representing 98 percent of the private passenger auto insurance market in Massachusetts committed to discounts earlier this year, according to the state Division of Insurance.

Q. How much money were people saving?

A. The average annual premium in Massachusetts is about $1,200, according to the website The Zebra. So, a 15 percent reduction for two months is $30, about the cost of a tank of gasoline.

Q. Is that discount commensurate with the decrease in driving?

A. No, not from what I can see. The state transportation department monitors traffic at a couple dozen locations across Massachusetts and produces a week-by-week comparison of this year’s traffic with last year’s. Early in the pandemic, back in March and April, traffic was down about 60 percent, the state reported. As the state gradually reopened in the summer, traffic rebounded, but not back to normal levels. In August, for example, traffic was down 21 percent compared to last year. At the beginning of November, traffic was down 25 percent.

Q. So, if premium discounts matched the latest driving reductions how much would a motorist in Massachusetts save?

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A. Using the latest November figures of a 25 percent reduction in driving, my estimate is about $300, about 25 percent of the average annual premium of $1,200.

Q. But Is that realistic?

A. There are plenty of administrative costs — overhead — that insurance companies must pay, pandemic or not. So you wouldn’t expect those costs to factor into a discount. But the biggest driver of premium costs is the claims insurance companies pay. And the amount of claims they pay is a function of the number of accidents their insured drivers get into, which is a function of the number of miles driven.

As of July, crashes remained about one-third below normal in Massachusetts, according to a report issued by the Consumer Federation of America.

Q. Who is making sure the insurance industry is giving a fair discount due to the pandemic?

A. In Massachusetts, the Division of Insurance and the attorney general’s office each play a role.

Q. What is the Division of Insurance saying?

A. The Division of Insurance says the discounts provided so far are fair and appropriate, but that it’s still monitoring the situation closely. It said in reply to my questions that it expects insurance companies to consider “any long-term changes to consumer behavior” when setting premiums for its review. (Auto insurers can make a rate filing at any time, provided it is at least 45 days before the proposed effective date.)

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Q. Why isn’t the Division of Insurance recommending larger discounts?

A. The Division of Insurance wants to make sure insurance companies have enough money in reserve to meet all claims — to remain solvent and thus help provide a competitive marketplace in the Massachusetts. “We obviously want refunds that are fair to consumers, but we also don’t want to overreact and create potential insolvency concerns,” it said in its statement to me.

Q. What other concerns about further discounts does the Division of Insurance have?

A. In a recent report, the Division of Insurance and 25 other state insurance regulators say that while there’s been a significant decrease in the frequency of accidents, there has also been an increase in the severity, though the report provided no statistics. “Insurance companies have reported significant increases in speeding activity, which could be one reason for the increasing cost of accidents,” the state regulators said in the report.

Q. It sounds like future discounts are unlikely.

A. Not necessarily. The regulators say that they expect insurance companies to use advanced technology to help evaluate losses and assess risks to “more accurately price auto insurance policies” — what’s known in the industry as “usage-based insurance.”

Q. What is usage-based insurance?

A. Insurance companies usually base insurance rates on things like your age, driving history, and vehicle type. These characteristics allow insurance companies to determine how you are likely to drive. But insurance companies are increasingly offering mobile apps or devices that track your actual driving behavior, such as speeding and hard braking.

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“We anticipate that as usage-based pricing becomes more prevalent,” the insurance industry and regulators will have the information necessary for them to evaluate whether premiums are fair, the reports says.

Q. What about the attorney general’s office?

A. In a series of letters to the Division of Insurance, the attorney general’s office has urged the agency to make sure premiums are “fair and not excessive.”


Got a problem? Send your consumer issue to sean.murphy@globe.com. Follow him on Twitter @spmurphyboston.