Ask the Expert: gets answers from WMU-Cooley legal expert

WMU-Cooley Professor and Associate Dean Emeritus Nelson Miller shared his expertise with (one of the leading outlets covering the personal finance industry) weighed in on the following answers to questions important to the car industry. 
  1. How do you think COVID-19 has affected consumer demand for car insurance? Dramatically. Driving patterns and transportation needs change quickly with changes in the economy. Recessions generally mean less cash in consumer pockets and thus less cash to pay at the gas pump for those road trips. The pandemic not only brought severe (if short-term) recession but also lockdowns limiting travel to critical needs. With so many commuters working remotely and few traveling for pleasure, demand for anything transportation related, including car insurance, fell off a cliff, again even if only for the short term.

  2. Do you think insurance companies have given consumers big enough refunds during the coronavirus pandemic? Hard to say whether refunds have been big enough. Some states mandated refunds, using their regulatory authority over insurers. But many insurers had already provided refunds out of sound marketing. Consumers hearing of refunds from one company will demand them from their own insurer--or switch companies. Everyone (consumers, insurers, regulators) knows that auto insurance is price sensitive. Price sensitivity is why insurers spend billions advertising lower rates. Refunds quickly became part of that market, driving insurers to ***. Vehicle owners also responded by notifying their insurers of reduced vehicle mileage or the retirement of vehicles, requiring contractual reductions in premiums. Those three forces--market demands, government regulation, and contractual opportunities--led to swift, if not always substantial or even fair--reductions. "Big enough" is always in the eye of the beholder.

  3. What does it say about car insurance companies that so many have celebrity endorsers? Not sure it says as much about the insurers as their customers. Anyone buying car insurance to be more like the latest hot celebrity needs to get a life. But in reality, celebrities just get our attention. Once an ad has our attention, the question pretty quickly comes back to price and (for a few of us) service. Let's hope that consumers are paying attention to those important criteria, not to the celebrity endorsers. One thing it does say about the insurers is that they have the cash to pay the endorsers, which may not be the message they intend.

  4. Do you think car insurance companies try to mislead customers or is it just marketing? When one hears of insurance fraud, one thinks reflexively about the consumer who misrepresents an accident or driving-citation history on an insurance application, or false and exaggerated insurance claims. But companies and their agents can commit fraud, too. Misrepresenting policy terms--telling the consumer that they are getting something that they are not getting--is the classic insurer fraud. I have successfully represented policyholders who unfortunately paid premiums for coverage that effectively did not exist. Anyone wondering whether their insurer has misled them should either contact a lawyer or the state insurance regulator, or at least shop their coverage around. Honest insurers can be pretty good at ferreting out their dishonest competitors' fraudulent practices. 
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