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Lawsuit Filed Against Geico Over Allegedly Insufficient Coronavirus Auto Insurance Discount

Berkshire Hathaway’s Geico, the United States’ second-largest auto insurer, faces a potential class-action lawsuit alleging the overcharging of policyholders amid the COVID-19 pandemic.

Filed in federal court in Illinois, the lawsuit claims that Geico’s “Geico Giveback” program, offering a 15% premium discount due to reduced driving during the pandemic, is insufficient. The plaintiff argues that a 30% discount should have been provided for the mid-March to end of April period, based on research by The Center for Economic Justice and the Consumer Federation of America.

The complaint accuses Geico of reaping significant profits during the pandemic, citing reports of a substantial increase in pretax underwriting gains for the first quarter of 2020. Furthermore, it alleges that existing policyholders were not granted discounts on premiums already paid or future payments for policies active at the onset of the pandemic.

Geico announced its giveback program in April, estimating approximately $2.5 billion in total discounts. The company stated that the credits would apply to auto and motorcycle policies renewed between April 8 and October 7, as well as new policies purchased during this period.

While some other insurers have offered higher discounts over shorter time frames, Geico’s CEO Warren Buffett defended the company’s approach during Berkshire Hathaway’s annual shareholder meeting. Buffett emphasized the uncertainties surrounding future claims and the company’s efforts to reflect reduced accidents in premiums for the following year.

The plaintiff, Briana Siegal, a Geico policyholder from Chicago, seeks class certification for all Illinois residents who purchased personal automobile, motorcycle, or recreational vehicle insurance from Geico between March 21, 2020, and the present. The complaint also seeks disgorgement of profits, declaratory and injunctive relief, and damages.

Geico had not issued a response to the lawsuit at the time of this report.

Several insurers have returned portions of premiums to policyholders in response to reduced driving during the pandemic. While Geico’s program is among the largest, questions remain about the adequacy of these measures. Insurers may face challenges as they navigate the balance between accommodating policyholders and maintaining financial stability amid changing economic conditions and claims activity.

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