In a WalletHub.com article titled, "2020's Cheapest Car Insurance," Meike Eilert discussed how COVID-19 has affected the car insurance industry. How do you think COVID-19 has affected consumer demand for car insurance?
COVID-19 has definitely impacted the extent to which we use our cars, whether it’s for travel or everyday activities, such as work or errands. People can work from home, get their groceries and household items delivered. Unfortunately, some may not be able to afford a car anymore due to financial constraints as a result of the pandemic. Of course, the demand for car insurance will drop as people drive less and own fewer cars. From my perspective, it is more important to consider how price-sensitive consumers are now when buying car insurance and how they perceive this entire category. Since consumers drive less and thus engage in less risky driving behaviors and get into fewer accidents, one would expect that they want to see insurers reward this positive behavior and get discounts.
Do you think insurance companies have given consumers big enough refunds during the coronavirus pandemic?
That is a tough question to answer since it’s difficult to understand how much insurance companies have saved from consumers driving less and getting into fewer accidents. As I mentioned previously, consumers are likely very price sensitive right now – whether they face financial constraints and may not be able to afford car insurance or whether they’re aware that they’re saving insurers money by not driving as much. Therefore, any refund will run the risk of not being perceived as big enough. The other question is when does/did the refund happen? COVID-19 has impacted our lives for over 8 months and while many insurance companies gave out discounts at the beginning of the pandemic, consumers may want or need them now more than they did then.
What does it say about car insurance companies that so many have celebrity endorsers?
When looking at endorsement, it’s important to look at whether the product or the brand image fits with the endorser. In my opinion, celebrity endorsers don’t present a good fit for this category. Are their driving habits the same as the ones of the majority of consumers? Are they driving similar cars and are they using their cars for similar activities as many consumers, so would their insurance needs and experience be the same? I would question whether using celebrities still resonates well with consumers looking for car insurance – this type of advertising seems to be outdated for this category.
Do you think car insurance companies try to mislead customers or is it just marketing?
I don’t think that car insurance companies are trying to mislead customers even though there is likely a lot of variation in the market. To be honest, I personally have not had to file an insurance claim since I started to drive in the United States, and therefore, I don’t have any firsthand experience with how likely my insurance would be to reject the claim. Ultimately, car insurance companies are providing a service and consumers expect them to deliver. There’s plenty of competition so if consumers think that they’re being misled, they have other options. Insurances are always a tricky product from a consumers’ perspective – you pay into them in case something happens and, most of the time, fortunately, nothing does. However, if a car crash happens, especially one that has severe consequences, having such a product can make the difference between being (financially) okay or not. So, I personally think, perceptions that consumers have and what car insurance companies are doing is really the result of the business model that they have, not because they intend to mislead. Read the original article on WalletHub.com
