Car Insurance Costs Dropped Due to the Pandemic. What Do Experts Predict for 2021?

For drivers, a teeny-tiny silver lining of the pandemic last year was cheaper car insurance. Experts say savings are likely to continue in 2021, but how much drivers may get back remains in question.

Americans are back on the roads today in greater numbers than they were last spring, when stay-at-home orders and widespread business shutdowns first caused a dearth of vehicles on the road. Not only are we driving less, says Matt Carrier, a principal at consulting firm Deloitte, but we’re driving differently. Since many people are still working and learning from home, we’re spreading out our trips over the course of the day. Morning rush hour commuters, for instance, have a lot less company on the road these days -- and less chance of crashing into one another.

All of which might seem to make continued insurance savings a slum dunk in the new year -- a development that consumer advocates say is just and necessary. Predictions from industry spokespeople lean in that direction, but the details are still emerging.

The murkiness over price savings in 2021 might have reached drivers themselves, and help to explain why a majority of respondents to a new Money poll expected little change in their car insurance costs this year. And why as many other respondents predicted an increase in their costs compared to 2020 as expected a price break.

Here’s what lies ahead for your car insurance bills in 2021, according to insiders, including whether to shop around for a policy, perhaps by using sites such as Money's new auto-insurance comparison tool.

Will car insurance prices drop in 2021?

Despite the 10-year trend to rising insurance rates, though, experts lean to predicting lower car-insurance costs in 2021, but not with a great deal of certainty.

“I would say premiums, in general, should go down in 2021, with the assumption that losses have gone down again,” says Fabio Faschi, property and casualty operations manager at Policygenius.

Faschi says it will be a while, though, before we can get more clarity — in part because insurers are still analyzing 2020 data, and still trying to figure out how and to what extent last year’s dramatic changes in our driving behavior will hold over into this year. “Because the industry had an unprecedented year, it’s unclear what those numbers mean in 2021,” he says.

“I do think rates will be slightly down. Our accidents are down by about 20 percent, if not more,” says Douglas Heller, an insurance expert with Consumer Federation of America, an advocacy group. “At the highest level, I would say that insurance rates in the coming year may be a little bit lower than they were going into 2020,” he predicts.

Allstate has announced rate cuts of between 5% and 8%, beginning on February 18, in states including Pennsylvania, Wisconsin, and Georgia. But Deloitte’s Carrier sees the good-hands company as in a minority. Most insurance companies, he says, are in a “wait and see” holding pattern while they try to figure out how much of the changes in our driving habits will stick even after daily life begins to more closely resemble B.C. — as in “Before COVID.”

“Broadly speaking, 2021 offers a lot of question marks,” says Jacob van Cleef, consumer watchdog associate at U.S. PIRG.

“We have two opposing things — we have the vaccine beginning to be rolled out, but at the same time, you also have people thinking we might have to shut down again, especially with the current spike we’re seeing in [COVID-19] cases,” he says.

A Money poll reveals drivers' expectations

If anything, Americans as a whole are less confident of a drop in the cost of car insurance this year than are the experts.

In Money's poll, of 2,200 respondents surveyed in late January about their financial plans and outlook for 2021, a slim majority -- 54% -- said they expected to pay about the same for car insurance in 2021. Those who expected a change were fairly evenly split between anticipating paying much more (5%) or somewhat more (10%) and less (6%) or somewhat less (8%) than they did in 2020.

Many drivers received pandemic-related rebates or refunds from their car insurer last year, and those givebacks may have factored into survey respondents' math for 2021. Or the expectation may merely reflect a resignation to rising car-insurance rates, which have been a reality for the average driver in every year from 2010 and 2019, according to the Insurance Information Institute.

There’s a little more consensus about what will be behind any changes in costs in 2021. A majority say the pandemic will be a major (27%) or minor (33%) factor, although more than one in four (41%) say it won’t be a reason at all. (The total exceeds 100% due to rounding.)

How consumers might get relief

If insurers (and even drivers) are uncertain about where rates will go, consumer advocates are adamant that auto-insurance costs should drop. They say insurers could — and should — be more generous passing along the savings they have reaped, and may reap in future, back to their customers.

PIRG conducted an extensive review of how, and how much, insurers returned to customers last year across the entire U.S. From analyzing that data, van Cleef concludes insurance companies have been overly parsimonious in returning customers’ money, given how much money they make and the deep financial pain being experienced by millions of American families. “We’re talking about money here that could be able to go to paying for groceries, paying for everyday things,” he says.

“I believe that it is almost certain that rates are higher than needed going into 2021, as the impact of the pandemic on driving will persist at least for many months,” Heller says.

“We’ve been driving much less and the insurance companies, after giving back a little in the spring, have pocketed all the excess since then and reported windfall profits to their shareholders,” he adds.

Heller also notes a double standard by insurers, depending on whether changes to rates benefit or hurt them. “Anytime there’s an indication that accidents are going up or people are driving more, insurance companies run for rate increases, but they’ve been slow-walking the savings that we should all be receiving in the wake of this pandemic.”

Van Cleef points out that any relief to drivers may not necessarily arrive as cuts to premiums. Instead, as in 2020, they could be delivered as rebates or refunds on premiums already paid -- which he thinks may be the more likely choice by insurers.

The uncertain outlook for rates only makes it wise to consider shopping around for car insurance in 2021, whether by getting quotes company by company or using comparison sites.

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