Class action alleges Geico was too stingy with pandemic relief

Geico may or may not save you a bunch of money on your car insurance, but the company’s facing a class action lawsuit for allegedly overcharging customers in the early days of the pandemic in 2020. The insurer offered credits to policyholders to compensate them for driving less, but many say the gesture didn’t go far enough.

In a San Jose, California, U.S. District courtroom, Judge Beth Labson Freeman gave the green light for a group of plaintiffs to file a class action suit against the insurance giant. Geico’s protest of the suit stated that a class action would be brutal to account for policy details and costs this long after the fact. Lawyers also noted that the suit would fail to account for differences between the lengths of time policyholders were customers and the variations in their policies.

Geico ponied up $2.5 billion in credits in 2020, with up to 15 percent on policy renewals. When COVID-19 almost completely shut the country down, nobody needed to drive, reducing the risk for insurers. Many big-name companies sent checks, gave policy credits, and offered other perks to customers in return.

Though the credits saved money and provided a bit of relief to thousands of people at a time when many had uncertain job futures, insurance companies certainly didn’t lose money on the deal. In fact, many came out of the year with record profits, which is the primary driver of the class action suit. Geico in 2020 reported $3.4 billion of pre-tax underwriting profit, up 127% over the previous year. The plaintiffs believe that Geico’s credits were not commensurate with the profit it earned at the time. The case also takes issue with the insurer’s claim that its actions gave “substantial and full relief.”

This suit is taking place in California, but others are in progress against the insurer. Geico got a similar case in New York dismissed but faces an ongoing legal situation in Chicago. USAA faces a similar suit in California, and it would not be surprising to see others across the industry.