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Thirty-four city, county and state consumer agencies from 18 states participated in the survey, which asked about the complaints they received last year, their biggest achievements, and new consumer protection laws enacted in their jurisdictions.

Top Ten Complaints in 2020

1. Auto: Misrepresentations in advertising or sales of new and used cars, deceptive financing practices, defective vehicles, faulty repairs, car leasing and rentals, towing disputes.
2. Home Improvement/Construction: Shoddy work, failure to start or complete the job, failure to have required licensing or registration.
3. Landlord/Tenant: Unhealthy or unsafe conditions, failure to make repairs or provide promised amenities, deposit and rent disputes, illegal eviction tactics.
4. Credit/Debt: Billing and fee disputes, mortgage problems, credit repair and debt relief services, predatory lending, illegal or abusive debt collection tactics.
5. Services: Misrepresentations, shoddy work, failure to have required licensing or registration, nonperformance.
6. Utilities: Complaints about gas, electric, water and cable billing and service.
7. Retail Sales: False advertising and other deceptive practices, defective merchandise, problems with rebates, coupons, gift cards and gift certificates, failure to deliver.
8. Travel: Misrepresentations about cost, amenities or other aspects of travel packages, failure to provide promised services, disputes about refunds.
9. (Tie) Health Products/Services: Misleading claims, unlicensed practitioners, failure to deliver, billing issues; Internet Sales: Misrepresentations or other deceptive practices, failure to deliver online purchases.
10. (Tie) Pandemic: price gouging, refunds for canceled events and travel, financial issues, problems getting repairs and other services, “self-help” evictions, scams, and other complaints stemming from the pandemic; Fraud: Bogus sweepstakes and lotteries, work-at-home schemes, grant offers, fake check scams, imposter scams and other common frauds; Household Goods: Misrepresentations, failure to deliver, repair issues in connection with furniture and major appliances.

This ranking is based on the categories that appeared most frequently in the consumer agencies’ “top ten” complaint lists. Collectively, the 34 agencies that participated in the survey handled 280,413 complaints and recovered or saved more than $262,973,073 for consumers in 2020 through informal mediation, administrative action, and lawsuits.

COVID-19 also significantly changed the way state and local consumer agencies operated. Most had to switch to working entirely remotely. Some agencies provided staff with cell phones and laptops and set up secure systems to enable them to work entirely from home. Others sent small numbers of personnel into their offices on a rotating basis to handle the phones and mail. Their staffs sometimes fielded calls about problems totally unrelated to consumer protection because people were unable to get through to other state or local agencies. Forced to rely on technology more heavily than ever, agencies encouraged consumers to communicate with them via email and used online platforms for administrative hearings and educational events that would normally be conducted in person. “State and local consumer agencies had to turn on a dime to change how they worked,” observed Grant. “They continued to provide vital information and assistance to the public without missing a beat.” The “Consumer Agencies Biggest Achievements” section of the report describes how agencies resolved consumers’ problems, improved their operations, and reached out to the public even as the pandemic raged.

Examples of Pandemic Complaints

• Wedding Fireworks Fizzled. A young couple had planned a river boat fireworks cruise as part of their wedding. Because public gatherings were restricted to 10 people and they had invited 60, they asked to cancel the cruise. The business refused to cancel without penalty. The couple were given a choice of losing 25 percent of their deposit if they canceled by a certain date or 100 percent if they waited longer to cancel. With the help of the District of Columbia Attorney General’s Office, they were able to obtain a full refund of $1,750.
• The Price Wasn’t Right. A consumer complained to the New York State Division of Consumer Protection that a local restaurant was adding a surcharge when customers paid by credit card. The restaurant insisted it was following the law and said its credit card processor had assured it that the practice was acceptable. However, the agency explained that under New York law, businesses that charge differently for credit cards must publish their prices to reflect the higher credit card amount. A business can offer a discount to cash-payers but cannot add an extra charge for paying with a credit card. The restaurant provided that information to the credit card processing company, which quickly adjusted its software to eliminate the surcharge and notified all of its clients of the change.
• Pasty COVID Cure. Investigative work by the Los Angeles County Department of Consumer and Business Affairs in California helped the Los Angeles City Attorney resolve a case against a local company, Insan Healing, and its CEO, Angela Oh, for allegedly advertising and selling radish paste as “a must-have product for the protection and prevention of the COVID-19.” The settlement provided for full restitution to consumers, a broad injunction, and a $20,000 civil penalty.
• Landlord Goes Too Far. After a landlord allegedly used physical violence against one tenant and attempted to have another tenant deported by ICE to remove them from their apartments, the Massachusetts Attorney General’s Office went to court to seek emergency injunctive relief to protect the tenants and witnesses in the case from any further harassment.
• Gym Member Gets Exercised. When a gym closed in March 2020 due to the pandemic, a customer was told he could freeze his membership so he wouldn’t be charged. However, he was charged $43.14 for the month of June. When he took it up with the gym, he was offered a 50 percent credit instead of a full refund. In disgust, he canceled his membership and was charged a fee for doing so. The New Mexico Attorney General’s Office got his money back.
• Ticket in Paradise. It was a lovely evening in Florida, and a woman parked her car in a lot at a beach to go for a stroll. When she attempted to put money in the meter, the screen was frozen. A resident who lived nearby informed her that people were not being charged for parking due to the pandemic. When she returned to her car, however, there was a $75 ticket from the private company that operates the lot. She filed an appeal, which was denied without explanation. The woman called and emailed the company multiple times, with no response. She filed a complaint with the Broward County Environmental and Consumer Protection Division, which got the ticket withdrawn.
• Masked Robbery. More than 2,300 price gouging complaints were filed with the North Carolina Attorney General’s Office last year. The agency sued Stephen Gould Corporation, a New Jersey-based business that allegedly offered millions of N95 masks to the North Carolina Emergency Management Unit of the North Carolina Department of Public Safety, UNC Health, Duke Health, and the Charlotte Chapter of the American Red Cross at a markup of more than 100 percent. If the sales had been successful, the company would have profited more than $30 million per transaction. In addition to winning a $150,000 judgment, the agency obtained an order permanently barring the company from engaging in unfair and deceptive practices or selling personal protective equipment at unreasonably excessive prices.
• Deep Freeze. Last winter an elderly couple who suffered from numerous disabilities and had another older woman living with them in their home asked the Arkansas Attorney General’s Office for assistance. Their HVAC unit, which was under warranty, had stopped functioning in August 2020. The business that sold it to them sent several subcontractors to try to repair it, but they were unsuccessful. The consumers had been using space heaters for months to keep warm. It soon became clear that the necessary parts were not available due to the pandemic. The business agreed to resolve the problem by replacing the HVAC unit.
• Smelly Situation. Fairfax County Department of Cable and Consumer Services in Virginia received 41 complaints involving trash companies in 2020. Due to workers’ exposure to COVID-19, trash companies struggled to maintain service. Consumers complained that their trash or recycling were not picked up as scheduled, nor were alternate arrangements made. They also complained that while their service had been reduced, their rates had increased. With the help of the agency consumers received credits for missed service, got reduced rates in some cases, and were provided with more timely service.
• No Home Away From Home. A woman asked the Consumer Assistance Council in Massachusetts for help when her request for a refund for a home she rented in Oak Bluffs for a week in August last year was denied. She explained that she could not travel to Massachusetts because of the requirement to self-quarantine for two weeks and the limited heath care facilities on the Cape. She was especially concerned about the potential for contracting the COVID-19 virus and bringing it home to her elderly mother, for whom she was the sole caregiver. The real estate broker agreed to rebook the house and refund the woman’s deposit, minus a small fee.

One thing that became clear in reviewing the complaint stories is that the usual terms of service and cancellation policies don’t take into account the unusual circumstances consumers experienced last year. For example, in one complaint, a mother put a prom dress on layaway for her daughter and when the prom was canceled, the retailer refused to return her money. “Since it wasn’t the consumer’s fault that the prom was canceled due to COVID, she understandably felt she shouldn’t have to pay for a fancy dress that her daughter, stuck at home, had no place to wear,” explained Grant. Often consumer agencies were able to persuade businesses to make exceptions to their regular cancellation and refund policies, but not always. They generally had a stronger basis to argue that consumers should be able to cancel with no penalty and get their money back when the pandemic prevented businesses such as party venues and sports promoters from being able to provide the promised services. Even then, however, consumer agencies sometimes found it difficult to resolve the problems. For instance, some childcare providers that were forced to temporarily close insisted that parents continue to pay their fees in order to “save” their children’s slots when the facilities reopened.

The “Pandemic Complaints” section of CFA’s survey report provides other examples of COVID-related complaints. There are Ten Tips for Navigating the COVID-19 Pandemic (and Other Disasters) in the report and separately at here.

State and local consumer agencies also continued to receive complaints last year about issues unrelated to the pandemic. Examples of these are provided in the “Real-Life Complaints” section of the report. There are tips for consumers throughout that section and collected in Appendix B.

The full 2020 Consumer Complaint Survey Report is available here.

Contact: Susan Grant, 202-939-1003

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In May of 2021, CFA released a new report by independent researcher Kanav Bhagat entitled, Avoiding COVID-19 Related Foreclosures by Implementing Cost-Effective Mortgage Modifications for Federally-backed Loans, specifically recommending that FHFA drop the loan-to-value ratio restriction to allow borrowers with more equity in their homes the chance to restructure their loans. This will help borrowers weather the economic hardships caused by the pandemic. Under the previous rules, borrowers with more equity in their homes were blocked from seeking payment restructuring.

“The prior rule put borrowers with greater home equity in a tenuous position by forcing them to either sell their homes or risk foreclosure if they were no longer able to afford their existing payments as a result of an economic hardship caused by COVID-19,” said Mitria Wilson-Spotser, Director of Housing Policy at the Consumer Federation of America.“

“Allowing homeowners to receive an interest rate reduction as part of their mortgage modification regardless of their loan-to-value ratio will help families suffering from COVID-19 related financial hardship keep their home. By taking this step, the FHFA and the GSEs will be able to offer more homeowners with a GSE-backed mortgage deeper payment reductions that create affordable monthly payments and avoid foreclosures,” said Kanav Bhagat, author of the paper.

Contact: Mitria Wilson-Spotser, 202-387-6121

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Payments on these loans have been paused since March 2020, during which time interest charges have also been suspended and the federal government has halted collection efforts against borrowers in default. The student loan payment pause has been one of the most important investments the federal government has made in Americans’ financial lives in a generation—a recognition that the inadequacies of the existing student loan safety net could not protect families in the midst of an economic and public health crisis.

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Vehicle inventory is down by about 30 percent which means car dealers have little incentive to negotiate.  “The rule of thumb that nobody pays ‘sticker price’ for a new car has fallen by the wayside as dealers stick to the manufacturers suggest retail price (MSRP) on the vehicle label,” said Gillis.  In fact, for some particularly popular vehicles in short supply, dealers are charging prices above sticker price.

Gillis’s advice on the best way to deal with this reality: “If you don’t need to replace your car right now, you should wait.”  The widely reported computer chip shortage and other repercussions from the pandemic are expected to ease up by the end of the year or early 2022. “By waiting, you’ll have more electric vehicles to choose from, as well as the 2022 models with the latest safety features,” said Gillis.

Unfortunately, there are many Americans who don’t have the luxury of holding off, and need to replace or buy a new vehicle right now.  If you find yourself in this predicament, CFA and Gillis are providing the following tips on coping with today’s market challenges.

Ten Tips on Saving in a Seller’s Car Market

1. Shop carefully. You can find some deals and incentives, especially on the less popular vehicles.  Everybody is looking for SUVs, but if a sedan meets your needs, you can find some good prices.
2. Shop around online. As car buyers become more comfortable with online vehicle purchases, more and more dealers are offering internet specials.  Shop carefully and read the fine print, but these offers can be good negotiating tools when you’re in the showroom.
3. Widen your search process.  If buying from a dealer 70-100 miles away will save you money, consider it. You can still take your car to your local dealer for service and warranty work.
4. Avoid the upgrades. Unfortunately, most manufacturers don’t let you pick and choose your options, you must buy them in packages. Skipping the fancy packages on a particular model can save you 10-20 percent.
5. Skip the extras.  Dealer add-ons are budget busters.  Floor mats, cargo containers, luggage racks and fabric treatments, if needed, can always be purchased later and at far less cost.
6. Decline the extended warranty.  Today’s new car warranties are very good and extended service contracts (they’re not really warranties) are not only expensive, but if they actually paid off for most people, they wouldn’t be such big profit centers.  Instead, plunk those service contract dollars in a special savings account to draw on if you need post-warranty repairs. Most likely, you can use this account to build up your down payment for your next vehicle.
7. Beware of using longer loans to reduce your monthly payments. While those smaller payments may sound attractive, you will pay significantly more in overall interest costs, and you’ll probably be “upside down” for the first year or two. That means if the car is totaled or you must sell it, you’ll have to make up the difference between your insurance payment (or sale) and the balance on your loan.
8. Shop around for financing. Interest charges are one of the most expensive aspects of car ownership. Knocking a point off the interest rate by shopping around will save you hundreds and lower your monthly payments.  Check with your credit union or bank to see what they are offering, so you’ll know if the dealer’s offer is a good one.  Warning, very few people qualify for the often-advertised 0 percent interest rates, so don’t get your hopes up.
9. Check out “No Haggle” dealers. No haggle or posted-price dealerships are becoming more prevalent. These dealerships will post a non-negotiable price on the vehicle, saving you the anxiety and pressure of trying to match wits with a seasoned, professional seller.
10. Consider selling your used car yourself. The used car market is hot, and you can usually sell it for more than the dealer will pay you on a trade-in. Those extra dollars can help make up for the higher prices you’ll see in the new car showroom.  Also, check out the national chains that offer to buy your vehicle with a price that’s good for 7 days.

Contact: Jack Gillis, 202-939-1018

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“Since March 2020, consumers have been driving much less than they were before the COVID-19 pandemic, and that is still true today. As a result, crashes and claims are well below normal, which means massive insurer profits,” said J. Robert Hunter, CFA’s Director of Insurance and a former Texas Insurance Commissioner. “Commissioner Lara’s announcement is most welcome and will result in additional money being returned to California drivers. Other Insurance Commissioners should be ashamed that they have done so little; they should follow suit and stand up for the residents of their states,” he continued.

CFA and CEJ put regulators on notice in March 2020 of impending windfall profits for auto insurers due to dramatically reduced driving, fewer cars on the road, fewer accidents, and fewer auto insurance claims. The groups repeatedly pressed commissioners to require insurers to give up COVID windfall profits and return premium to consumers. The groups calculate that since the pandemic began, auto insurers nationwide have seen about $25 billion in fewer claims, while the premium relief from insurers has been half or less than that.  In addition, miles driven, cars on the road and auto claim frequency are still down from pre-pandemic levels as more businesses have decided to move workers from offices to working from home.

State Farm Announces California-Only Refunds of 18% for June Through December 2020

 Wednesday, State Farm announced that it would be returning an additional $400 million to California customers as a result of “better than anticipated claim results.” According to State Farm, approximately 3.5 million Californians will receive checks refunding 18% of the premium they paid between June and December 2020. The company has not announced additional refunds for drivers in any other state, and, the consumer groups noted, no other state insurance commissioner has required companies to provide additional refunds of windfall profits.

“Consumers rely on their state insurance commissioners to protect them from being ripped off by insurers, but most have let auto insurers collect massive windfall profits, while the millions of Americans struggled through the pandemic,” said CEJ Executive Director Birny Birnbaum. “Commissioner Lara’s action shows –  and quantifies –  the importance of having a state insurance regulator who will stand up for consumers.”

Insurance Claims Have Fallen Dramatically During the Pandemic

In his announcement, Commissioner Lara revealed that his Department’s review of auto insurance loss data during the pandemic proved the need for additional refunds.  The Department analysis found that bodily injury claims fell by 41.7% and property damage liability claims fell by 40.4% from March to September 2020, compared to the same period of 2019.

While most auto insurers provided limited refunds to consumers in the Spring of 2020, they were extremely inadequate.  California’s review found that from March to September 2020, insurers refunded about 9% of premium to consumers, but they should have refunded 17% of premium. Moreover, since spring 2020 the vast majority of companies have stopped providing any sort of relief. Only in California, which has required ongoing refunds since the pandemic started, are consumers protected from being overcharged.

Insurance Company’s Reported Windfall Profits In 2020

 Auto insurer profits have skyrocketed during the pandemic. On February 22^nd, Allstate approved a quarterly dividend double that of previous dividends, after reporting that its auto insurance underwriting income from 2020 was over $3.4 billion or double that of 2019. Earlier this year, Progressive paid an annual dividend of $4.50 per share, which was almost double its 2019 annual dividend. Berkshire Hathaway’s GEICO, similarly, doubled its underwriting earnings in 2020 compared with 2019.

“While the pandemic has taken an incredible toll on Americans, auto insurance companies have swept up huge profits by failing to return billions that drivers overpaid for coverage during this period of dramatically reduced driving and accidents,” said CFA’s insurance expert Doug Heller.

Contacts:
Michael DeLong, CFA, 925-708-1135
Birny Birnbaum, CEJ, 512-912-1327
Doug Heller, CFA, 310-480-4170

The post California Insurance Department Ends Auto Insurers’ COVID Windfall Profits appeared first on Consumer Federation of America.

The U.S. Consumer Product Safety Commission (CPSC) released a report yesterday analyzing product-related ER visits during the first six months of the pandemic from March to September 2020 compared with March to September 2019.

Injuries related to button batteries rose significantly (93%) among young children ages 5-9. Ingestion of these batteries, such as those found in TV remotes, can cause severe tissue burns and death.

The largest increases in ER-treated injuries across all age ranges occurred with fireworks and flares (56%), skateboards, scooters, and hoverboards (39%), and ATVs, mopeds, and minibikes (39%).

ER-treated injuries related to cleaning agents rose by 84%, while injuries related to soaps and detergents rose by 60%, including liquid laundry packets, which pose a severe ingestion hazard for small children as well as seniors.

“The CPSC’s important new report on consumer product injuries during the COVID-19 pandemic documents that stay-at-home orders have fundamentally impacted product safety injuries in the United States,” stated Rachel Weintraub, Legislative Director and General Counsel at Consumer Federation of America. “The CPSC needs significantly more resources to address these hazards; consumers should wear protective equipment when using skateboards, scooters, bicycles, OHVs, and hoverboards; consumers should not operate OHVs on roads and should operate OHVs that are approved for their age; check products to make sure batteries are secured and not missing; and consumers should lock up cleaning supplies.”

“These findings show that everyday products are posing more of a hazard than before due to the pandemic as children are spending more time at home, and parents are juggling childcare and working remotely,” said Nancy Cowles, Executive Director of Kids In Danger. “Protect your children by securing battery compartments of electronics and other products and lock away cleaning supplies from children.”

“With so many more people at home all day, the risks of injuries are even greater,” said Remington A. Gregg, counsel for civil justice and consumer rights at Public Citizen. “As we continue making progress against the pandemic, greater, not less, vigilance is important. Working together, we can keep our families safe.”

The CPSC’s report offers safety tips for consumers:

• Keep cleaning products in their original bottles. Lock them up and away from younger children.
• Wear a helmet before riding a scooter, skateboard, hoverboard, or bicycle. When buying a helmet look for the label that reads “Complies with U.S. CPSC Safety Standards for Bicycle Helmets.
• Don’t allow young children to play with or ignite fireworks, including sparklers.
• Keep products with small batteries, including TV remotes, away from kids, and make sure that the battery compartments on children’s toys are secured properly.

View this consumer guide detailing common hazards at home that have been exacerbated during the pandemic while sheltering in place, created by KID, CFA, and U.S. PIRG.

The injury data was analyzed from the National Electronic Injury Surveillance System (NEISS), which represents a scientifically selected sample of hospitals nationwide. Non-ER-treated injuries were not included in the dataset, so it does not include consumers who feared going to the ER for possible COVID-19 exposure. View the full CPSC report and key highlights.

Contact: Rachel Weintraub, 202-904-4953

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Accidents Way Down

 Data collected by the groups from four states – Colorado, Maryland, Massachusetts, and Texas – representing different population densities and responses to COVID-19 show over 181,000 fewer accidents in those states during the pandemic than during the same period in 2019. This includes a decline of more than 83,000 accidents after May, when most insurers stopped providing refunds and premium credits. With the exception of California, where Insurance Commissioner Ricardo Lara ordered insurers to continue issuing refunds through the summer, the reduction in insurance claims has not led to ongoing premium relief for the many millions of Americans paying insurance premiums based on 2019 accident expectations.

Source: Colorado Department of Transportation, Maryland Department of Transportation, Massachusetts Department of Transportation, and Texas Department of Transportation. Compiled by Consumer Federation of America on December 16, 2020.

 Profits Way Up

Over the course of the pandemic, auto insurers have announced incredible increases in profits, even after accounting for their inadequate refunds to consumers.

• Progressive reported over $3.3 billion in net income between April and September (Q2 and Q3), which is $1.5 billion, or 82%, more than it earned during the same period last year. On December 4, Progressive announced a $4.50 per share annual dividend for its shareholders (~$2.6 billion), which is nearly double the 2019 annual dividend.
• GEICO’s pre-tax earnings tripled during the second and third quarters of 2020 to $2.34 billion compared with $769 million in 2019. The third quarter earnings are up 83% from $835 million in earnings for the third quarter of 2019.
• Allstate reported auto insurance underwriting income for the combined two quarters of $1.87 billion, more than a billion dollars better than 2019.

In their reports to shareholders, many companies have highlighted the pandemic’s impact on road travel as driving lower losses. Month after month, for example, Progressive has noted that “auto accident frequency continued to be lower on a year-over-year basis due to restrictions put in place to help slow and/or stop the spread of the novel coronavirus, or COVID-19.” Allstate’s financial reports illustrate this impact clearly: even as it added 11,500 auto insurance policies in 2020 and took in $274 million more in premiums from customers during Q2 and Q3 2020 over 2019, its auto insurance losses dropped by $1.4 billion during the same time.

“The public health and economic crises we have faced since March have kept people off the road and sharply reduced crashes, which means insurance claims are way down, with insurers reaping huge profits,” said J. Robert Hunter, CFA’s Director of Insurance and former Texas Insurance Commissioner. “Most companies refunded some premium in April and May, but, since then, insurance rates have been excessive and insurer profits obscene. Insurers need to give back more to Americans, many struggling with unemployment and other economic hardships.”

Crash Statistics Reveal That the Reduction in Accidents is National and Ongoing

 CFA assembled day-by-day records of crashes through October 31, 2020 for Colorado, Maryland, Massachusetts, and Texas, each of which maintains accessible, regularly updated accident records. In all four states, there have been far fewer auto crashes than 2019 because of the pandemic, various restrictions on businesses, schooling, and other activities, and general public caution. There is nothing to suggest that other states’ experiences are significantly different from these four.

The data from the four states indicate that accidents are down by 31% since the beginning of the pandemic when comparing 2020 with 2019. While the decline was somewhat less during the summer months, accidents are falling again as the pandemic has worsened. There were 23% fewer crashes in September and October of 2020 than 2019, generating more windfalls for insurers that pay, on a monthly basis, hundreds of thousands of fewer claims nationwide than their rate plans anticipated.

“The math is very simple: as a result of the pandemic there have been millions of fewer accidents and billions in extra profits for insurance companies that have not given back enough of the excess premium they continued to collect even as the pandemic lasted for months and months,” said Doug Heller, an insurance expert for CFA. “With the renewal of stay-at-home orders and continued high unemployment and extensive remote work and schooling, getting more rate relief into the pockets of auto insurance policyholders is absolutely necessary.”

Most auto insurers have provided two to three months of premium credits, refunds, or dividends to consumers during the spring. At the time most companies refunded about 15% to 20% of premium, though CFA and CEJ calculations indicated that 30% premium refunds were more appropriate.

In numerous letters sent to State Insurance Commissioners, CFA and CEJ urged Commissioners to require auto insurers to give back premium relief to consumers. Only California, Michigan, New Jersey, and New Mexico issued bulletins requiring this relief, with California being the only state that has required auto insurers to continue providing refunds beyond June 2020.

“Most state Insurance Commissioners have not taken the need for refunds seriously enough,” said Birny Birnbaum, Executive Director of CEJ. “They should take steps to make sure that insurance rates are fair and not excessive, since accidents are down and windfall insurer profits are up. The new crash data must be a wakeup call for them to swing into action.”

According to Birnbaum, an economist and former Associate Insurance Commissioner in Texas, premium givebacks should be related to the drop in accidents, and should be adjusted monthly as long as the pandemic persists.  Due to some fixed costs faced by insurers, a 33% reduction in claims should result in a 26% refund of premium.  But, even fixed expenses change and over the past nine months, insurers have reduced those expenses by, among other things, moving workers permanently to home-based work and closing offices.  The table below shows appropriate refund amounts under different accident decline scenarios.

Recent Public Health Orders Will Reduce Driving and Crashes Again

COVID-19 cases are currently rising across the nation and over 300,000 Americans have died of the virus. States and cities are re-imposing restrictions to curb the spread and prevent hospitals and health care workers from being overwhelmed. These rules will contribute to keeping driving and crashes lower, and further reinforce the need for premium relief.

Below are just a few of the recent orders issued:

• On November 2, Massachusetts Governor Charlie Baker announced a new stay at home advisory from 10 p.m. to 5 a.m., as well as shutting down alcohol sales at 9:30 p.m., and limiting indoor gatherings to ten people.
• On November 10, Maryland Governor Larry Hogan announced new restrictions to curb the spread of COVID-19. They include reducing indoor dining capacity, a 25 person limit for indoor gatherings, and requiring state workers to telework.
• On November 17, Colorado Governor Jared Polis also issued new restrictions, including a ban on indoor events, reductions in capacity for gyms, and restrictions on alcohol sales.
• On December 3, California health officials announced a Regional Stay at Home Order that will be triggered if Intensive Care Unit capacity drops below 15 percent in a given region. Most of California is now under these orders, which mean strict new closures for many businesses and a ban on gatherings with people outside immediate households.
• On December 3, the North Texas region imposed limits on businesses after more COVID-19 patients had to go to hospitals. Businesses now have to ramp down to 50% capacity.
• On December 9, Baltimore Mayor Brandon Scott announced additional restrictions, including a ban on indoor and outdoor dining at restaurants, limits on indoor and outdoor gatherings, and capacity limits for retail stores and malls.
• And on December 10, Pennsylvania ordered a ban on indoor dining at restaurants and new size limits on gatherings, Virginia implemented a modified stay at home order, and Oklahoma limited public gatherings to 50% capacity.

“The choice for Insurance Commissioners could not be clearer. Either they require that excessive premiums are returned to customers or they allow giant insurance companies to continue to collect windfall profits on the backs of Americans stuck at home and struggling through this pandemic,” said CFA’s Hunter.

Thankfully, COVID-19 vaccines are being distributed and people are receiving them. But we still have a considerable way to go before the pandemic is over. National Institute of Allergy and Infectious Diseases Director Dr. Anthony Fauci recently stated, “As we approach the third and fourth quarters of 2021, I think we can get back to a considerable degree of normality, but it’s going to depend on the uptake of the vaccine.”

This indicates that driving habits will not return to normal for many months. And the new “normal” will have less driving than the old normal because millions of Americans will continue to work remotely. Shopping habits and other activities have changed, some likely permanently, which will lead to a further reduction in driving. In order to protect consumers from overpaying for auto insurance during the pandemic, it is critical that regulators ensure that companies refund the excessive premium that has been, and continues to be, collected from policyholders.

Appendix: Charts Showing Crash Declines in Colorado, Maryland, Massachusetts, and Texas

Contacts:
Robert Hunter, CFA, 703-731-6353
Birny Birnbaum, CEJ, 512-912-1327
Doug Heller, CFA, 310-480-4170

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Over the past nine months, the COVID-19 pandemic has been ravaging the lives of millions of Americans. As COVID-19 continues to spread across the country at alarming rates, it’s devastating impact on the American economy and household finances is continuing to cause tremendous financial distress for families and small businesses. Due to underlying health and socioeconomic disparities, low- and moderate-income families and communities of color, especially Black, Latinx, and Native American communities, have been hit particularly hard by illness, unemployment, and economic instability. These consumer protections are desperately needed throughout the country.

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Texas Appleseed, the Center for Economic Justice, Texas Watch, the Texas Public Interest Research Group (TexPIRG), and the Consumer Federation of America sent a letter to TDI and Texas legislators highlighting erroneous and misleading information that TDI has used to justify their failure to provide premium relief to consumers.

This comes after months of conversations and letters between the consumer groups and the agency. As the COVID-19 pandemic unfolded, the organizations first urged the agency to act starting in the spring, when there were widespread stay-at-home orders. The groups provided additional information and data as the pandemic continued, and met with the Department for a follow up in August.

“We all want to work closely with the agency, but are becoming increasingly concerned by the lack of action to protect Texans, as we navigate the generational circumstances of a hundred-year pandemic,” said Bay Scoggin, TexPIRG Director.

Texas law protects insurance customers from “excessive, inadequate, and unfairly discriminatory rates.” Fewer crashes and claims coupled with record profits by auto insurers indicate that Texans have been overcharged during the pandemic.

“We have been evaluating different state responses to the pandemic all year, and while some have required refunds for consumers, Texas’s response has fallen short,” said J. Robert Hunter, CFA’s Director of Insurance. “The Texas Department of Insurance has not ensured that all Texans get the relief they deserve. As a former Texas Insurance Commissioner, I am very disappointed.”

The consumer groups point to shareholder reports and their own research to show that auto insurance companies made record profits as lockdown efforts were put in place across the country. By Texas Appleseed’s estimate, Texas auto insurers made between $606 million and $869 million in COVID-related profits even while consumers continue to struggle to pay bills during the economic downturn.

“Texas families are hurting financially, and they need insurance rate relief right now. Lines at food banks are growing. Evictions are on the rise. Every dollar counts for families across our state. Insurance overcharges hurt even more during the pandemic,” said Ware Wendell, Texas Watch Executive Director.

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The consumer and business travel groups, which include the Business Travel Coalition, Consumer Action, Consumer Federation of America, National Consumers League and Travel Fairness Now sent a joint letter to the CEOs of Alaska, American, Southwest and United Airlines asking them to agree to a five-point “737 MAX 8/9 Passenger Protection Plan.” The five protections include:

1. Allowing passengers concerned about flying on a 737 MAX 8 and 9 to change to flights operated with other aircraft without any financial penalties such as differences in fare with the ticket they already purchased, all the way up to departure time. This includes flights operated by the airline itself and those operated by that airline’s “code-share” partners.
2. If no other aircraft is operated on a passenger’s itinerary, offering consumers the option of either a full refund or the ability to apply the full value of the ticket to a ticket to a different destination, without incurring a change fee, administrative fee or other financial penalty.
3. If a consumer is concerned about flying on a 737 MAX 8 or 9 to a degree that they’d rather not travel at all, provide them with a full refund on a timely basis.
4. Updating the airlines’ “Contract of Carriage” to reflect these changes and make them binding.
5. Providing consumers and travel agents with easily viewable information on the type of aircraft that will be used to operate a flight in advance so that consumers have full knowledge of whether a flight being considered is being operated with a 737 MAX 8 or 9, well before making a decision to purchase an airline ticket on a specific flight.

“The circumstances surrounding the Boeing 737 MAX 8 and 9 are unprecedented in the history of commercial travel and call for extraordinary protections for understandably concerned consumers,” said Kurt Ebenhoch, executive director of Travel Fairness Now. “While we appreciate the initial accommodations that some airline officials have shared through public comments, we look forward to them formalizing those plans into binding commitments consumers can depend on before committing to purchase a plane ticket.”

In the U.S., there are four airlines that either operate or have ordered the Boeing 737 MAX – Alaska Airlines, American Airlines, Southwest Airlines and United Airlines.

“The Business Travel Coalition applauds airlines that have said they will allow passengers, fearful of flying a Boeing 737 MAX 8 and 9, to rebook for free once they take to the air again,” stated founder Kevin Mitchell. “It represents a smart cost-neutral business decision for travel and procurement managers around the world as they grapple with a MAX 8 and 9 related ‘duty-of-care’ requirement of not knowingly placing employees in harm’s way. These accommodations, if followed by all MAX 8 and 9 operators, should facilitate travel policies that make booking a 737 MAX 8 and 9 a voluntary decision for travelers,” added Mitchell.

“Consumers shouldn’t be forced to fly on the 737 MAX or have to pay more if they don’t feel comfortable doing so,” said Susan Grant, director of Consumer Protection and Privacy at Consumer Federation of America. “If this plane is put back in service, it’s crucial for the airlines to adopt formal policies to accommodate consumers’ concerns.”

Last-Minute Aircraft Substitutions

Travelers may also be faced with airlines making close-to-departure aircraft substitutions, where a published schedule shows a flight operated with a plane other than a 737 MAX 8 or 9, and that aircraft becomes delayed or requires lengthy maintenance work. To prevent a cancellation or lengthier delay, the airline may decide to substitute the aircraft originally planned for the flight with a 737 MAX 8 or 9 instead.

“Many travelers now dread the thought of getting on a 737 MAX and understandably will go out of their way to book travel on another kind of aircraft,” said Linda Sherry, director of National Priorities for Consumer Action. “Having gone to the trouble of making their preferences known, these travelers should never face last-minute aircraft substitutions that would land them in a 737 MAX. We fully support strong, formal and transparent airline policies that give these travelers the right to switch to another aircraft when possible, paying no more than they did for the same type of ticket and class, or be given a full refund or credit if no alternative is available.”

“Both Boeing and the FAA have shaken the public trust, and the burden should not be on consumers who are rightfully concerned about the safety of this aircraft,” said John Breyault, vice president, Public Policy, Telecommunications and Fraud for National Consumers League. “Passengers should have the right to opt out of flying on the 737 MAX, and there should be no financial penalty for doing so.”

Code-Sharing

Many airlines engage in the practice of “code-sharing,” where they market flights operated by another airline as if it were their own, using the two-letter airline code on flights operated by different airlines.

 The consumer and business groups recommend that travelers concerned about flying on a 737 MAX also check if flights operated by code-sharing partners airlines are using a 737 MAX. For example, while a U.S. airline on a passenger’s itinerary may not fly the 737 MAX, an international carrier that a passenger is connecting to might.

Airline Contracts of Carriage

An airline’s “Contract of Carriage” details all of the contractual details and obligations between a consumer and an airline when a plane ticket is purchased, including what the consumer is entitled to and may expect. Airlines sometimes use Contract of Carriage language to enforce rules, collect additional revenues and deny services. Unfortunately, these “contracts of adhesion” can be one-sided, confusing and do more to protect the interests of the airlines, not consumers.

Contact: Susan Grant, sgrant@consumerfed.org

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“The facts make clear that the inaction by most state Insurance Commissioners to assure refunds are adequate has lined the auto insurers’ pockets at the expense of American consumers,” said Bob Hunter, CFA’s Director of Insurance and former Texas Insurance Commissioner. “The overwhelming need for Insurance Commissioners, who are charged with ensuring rates are not excessive, is to direct insurers to provide the appropriate premium relief from mid-March to the present, and this need continues. Consumers will require premium relief into the future as long as the pandemic depresses vehicle miles traveled and accident claims.”

CFA and CEJ have collected and analyzed crash data from Texas and Massachusetts over the past nine months, and provided updates in several letters to Commissioners urging givebacks for consumers because of the COVID-19 pandemic and its impact on driving. The most recent statistics from July 2020 indicate that crashes remain between 14% and 20% below their 2019 level in Texas, and between 32% and 40% below normal in Massachusetts. Paybacks of excessive premiums are required to give earned relief to millions of Americans who are unemployed or otherwise financially stretched by the pandemic.

Auto insurers have reaped enormous profits from the declines in crashes. In its August report, Progressive reported a 177% increase in monthly profits over August 2019, and noted that its losses were substantially lower than usual due to the pandemic and various measures to combat it. And GEICO reported $2.1 billion in second quarter 2020 earnings before income taxes compared with $393 million in the second quarter of 2019, again due to fewer car crashes and reduced claims. These COVID windfall profits make it clear that the demand for greater refunds to consumers is not a request for assistance but a growing debt that insurers owe to their customers, according to consumer advocates. While regulators in four states-California, Michigan, New Jersey, and New Mexico-initially ordered refunds for consumers, only California has mandated ongoing premium relief.

“In our previous letters to Commissioners, we provided analyses of these crash reductions and the need for premium relief,” said Birny Birnbaum, Director of CEJ. “Those analyses have proven to be remarkably accurate. And the current state of affairs is hurting communities of color and low-income consumers the most. This makes it all the more important that Commissioners step up and make sure insurers are returning consumers’ excess premium on an ongoing basis.”

Contacts:
J. Robert Hunter, CFA, 703-528-0062
Birny Birnbaum, CEJ, 512-912-1327
Doug Heller, CFA 310-480-4170

The post Auto Insurers Reap Tens of Billions in COVID Windfall Profits Due to Reduction in Miles Driven and Crashes appeared first on Consumer Federation of America.

Therefore Commissioners of Insurance, who are charged with ensuring rates are not excessive, need to direct insurers to provide the appropriate premium relief for the period from mid-March through the present to personal auto insurance policyholders and to continue to provide premium relief into the future as long as the pandemic depresses vehicle miles traveled and claims.

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