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Auto Insurers Earn Sweet Spot Amid Coronavirus-Led Scarce Driving
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The coronavirus-led pandemic shook the insurance industry to a great degree. However, one particular category of insurers dealing with auto insurance is enjoying the market’s sweet spot.
The spread of COVID-19-triggered sickness forced Americans to stay indoors and work from home. This reduction in travel is kind of a silver lining in the cloud for players that deal in big auto insurance business.
Decline in driving means fewer vehicles on road, which in turn, lowered the frequency of road accidents and decreased claim losses for auto insurers. The Allstate Corp. (ALL - Free Report) has witnessed a decline of about 35% to 50% in driving in most states.
Gaining from this trend, insurers like Allstate, Geico, the auto insurance unit of Berkshire Hathaway Inc. (BRK.B - Free Report) , The Progressive Corp. (PGR - Free Report) and The Travelers Companies, Inc. (TRV - Free Report) are likely to see profitable first-quarter results in their auto insurance business.
Year to date, shares of Allstate, Berkshire and Travelers have declined 18.1%, 17.8 and 26.2%, respectively, while the Progressive stock has gained 3.5% against the industry's decline of 19.7%.
Some of these players are also returning a portion of their collected auto insurance premiums to their policy holders.
Allstate announced that it will provide a Shelter-in-Place payback worth above $600 million over the next couple of months (April and May), which will be almost 15% of its customers’ monthly premium.
Another company, Geico, is planning to dole out $2.5 billion in benefits to its auto insurance policyholders. To this end, the company plans to return 15% of premiums to auto and motorcycle insurance customers for renewals over the next six months (from Apr 8, 2020 to Oct 7, 2020) as well as new policies bought during the period.
Companies are also offering relief to their customers on non-payment of premium dues by halting their cancellation of coverage due to non-payments, allowing them to defer their premium payments without any penalty, giving them the choice to delay two consecutive premium payments and also permitting them to pay what they can afford.
The insurance industry, which broadly encompasses life and property plus casualty (PC) insurers, has been suffering a lot due to the COVID-19-led pandemic.
Lawmakers have also been asking insurers to cover business losses emanating from the virus-related fallout. But this faced friction was opposed by the insurers who claim that these costs are outside the purview of their policy wording and also, meeting such claims might dent their profitability.
Life insurance industry has been massively hit by the very low interest-rate levels, given its exposure to products that provide guaranteed minimum returns. PC insurers have taken a huge beating from low investment income, induced by weak investment yields and equity market downturns. Property and casualty insurers come with wider exposure to equity investments compared with life insurers.
We thus anticipate depressed first-quarter earnings for most insurance industry participants. However, the players with exposure to auto insurance business should be relatively better-off.
Today you are invited to download our latest Special Report that reveals 5 stocks with the most potential to gain +100% or more in 2020. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.
This pioneering tech ticker had soared to all-time highs and then subsided to a price that is irresistible. Now a pending acquisition could super-charge the company’s drive past competitors in the development of true Artificial Intelligence. The earlier you get in to this stock, the greater your potential gain.
Image: Bigstock
Auto Insurers Earn Sweet Spot Amid Coronavirus-Led Scarce Driving
The coronavirus-led pandemic shook the insurance industry to a great degree. However, one particular category of insurers dealing with auto insurance is enjoying the market’s sweet spot.
The spread of COVID-19-triggered sickness forced Americans to stay indoors and work from home. This reduction in travel is kind of a silver lining in the cloud for players that deal in big auto insurance business.
Decline in driving means fewer vehicles on road, which in turn, lowered the frequency of road accidents and decreased claim losses for auto insurers. The Allstate Corp. (ALL - Free Report) has witnessed a decline of about 35% to 50% in driving in most states.
Gaining from this trend, insurers like Allstate, Geico, the auto insurance unit of Berkshire Hathaway Inc. (BRK.B - Free Report) , The Progressive Corp. (PGR - Free Report) and The Travelers Companies, Inc. (TRV - Free Report) are likely to see profitable first-quarter results in their auto insurance business.
Year to date, shares of Allstate, Berkshire and Travelers have declined 18.1%, 17.8 and 26.2%, respectively, while the Progressive stock has gained 3.5% against the industry's decline of 19.7%.
Some of these players are also returning a portion of their collected auto insurance premiums to their policy holders.
Allstate announced that it will provide a Shelter-in-Place payback worth above $600 million over the next couple of months (April and May), which will be almost 15% of its customers’ monthly premium.
Another company, Geico, is planning to dole out $2.5 billion in benefits to its auto insurance policyholders. To this end, the company plans to return 15% of premiums to auto and motorcycle insurance customers for renewals over the next six months (from Apr 8, 2020 to Oct 7, 2020) as well as new policies bought during the period.
Companies are also offering relief to their customers on non-payment of premium dues by halting their cancellation of coverage due to non-payments, allowing them to defer their premium payments without any penalty, giving them the choice to delay two consecutive premium payments and also permitting them to pay what they can afford.
The insurance industry, which broadly encompasses life and property plus casualty (PC) insurers, has been suffering a lot due to the COVID-19-led pandemic.
Lawmakers have also been asking insurers to cover business losses emanating from the virus-related fallout. But this faced friction was opposed by the insurers who claim that these costs are outside the purview of their policy wording and also, meeting such claims might dent their profitability.
Life insurance industry has been massively hit by the very low interest-rate levels, given its exposure to products that provide guaranteed minimum returns. PC insurers have taken a huge beating from low investment income, induced by weak investment yields and equity market downturns. Property and casualty insurers come with wider exposure to equity investments compared with life insurers.
We thus anticipate depressed first-quarter earnings for most insurance industry participants. However, the players with exposure to auto insurance business should be relatively better-off.
Among the stocks mentioned above, Allstate, Travelers and Progressive carry a Zacks Rank #3 (Hold) each. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Free: Zacks’ Single Best Stock Set to Double
Today you are invited to download our latest Special Report that reveals 5 stocks with the most potential to gain +100% or more in 2020. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.
This pioneering tech ticker had soared to all-time highs and then subsided to a price that is irresistible. Now a pending acquisition could super-charge the company’s drive past competitors in the development of true Artificial Intelligence. The earlier you get in to this stock, the greater your potential gain.
See 5 Stocks Set to Double>>