California Insurance Commissioner Ricardo Lara Finds Auto Insurance Companies Overcharged Drivers As Accidents Plummeted During The Pandemic
By Lonce Lamonte and the California Department of Insurance - March 11, 2021
Department orders insurance companies to report by April 30th how they will return additional premiums back to California policyholders; also seeks additional data about commercial insurance losses
Insurance Commissioner Ricardo Lara discusses his action in a video (1:30)
Last April 2020, as Californians stayed off the roads in response to public health “stay-at-home” orders, Insurance Commissioner Ricardo Lara ordered auto insurance companies to return a percentage of paid premiums —saving drivers collectively more than $1.75 billion in 2020. After a systematic review of data submitted by insurance companies —the only such review in the country —he has found that insurance companies continued to overcharge consumers despite drastically reduced risk of accidents and loss due to the ongoing pandemic.
Today, Commissioner Lara directed auto insurance companies to report by April 30th how they will return additional premium back to California policyholders that was overcollected in 2020. He is also directing commercial insurance companies to provide data about commercial policies held by California businesses, which could lead to additional savings for small businesses that are struggling to survive due to the pandemic.
“My order saved California drivers more than $1.75 billion last year — the most in the nation. But while millions of us stayed home helping to fight the spread of the virus and reducing the risk of accidents for our essential workers, insurance companies continued to collect inflated premiums,” said Commissioner Lara. “The bottom line: Insurance companies overcharged consumers and need to do more to make it right and help Californians recover.”
The Commissioner’s review included the top 10 insurance groups representing 80 percent of the private passenger automobile insurance market. He found:
· Over seven months from March to September, insurance company groups returned on average 9 percent of auto premiums, but the Department’s analysis found they should have refunded nearly double that amount —17 percent —over the seven-month period.
· Bodily injury claims fell by 41.7 percent and property damage liability claims fell by 40.4 percent during March to September 2020, compared to the same period in 2019.
· For April 2020, the first full month of the statewide “stay-at-home” order, the gap between the refund indicated by insurance company group data and the premium they actually returned was approximately 13% — representing about $220 million in excess premium collected by insurance companies for that month alone.
· All of the top 10 private passenger insurance groups offered premium relief ranging from 10 to 22 percent for the months of March to May. However, by December, only four insurance groups were still offering any partial refunds, despite the continuing pandemic and a multitude of counties still remaining in the purple tier, or “most restrictive” tier.
“Insurance Commissioner Lara’s order to continue refunds is welcome news to millions of California consumers and businesses continuing to experience a decline in losses and accidents as a result of this global pandemic,” said Richard Holober, president of the Consumer Federation of California. “California continues to set the standard for holding insurance companies accountable for returning additional premiums to their policyholders to promote a stronger recovery."
Commissioner Lara issued his first bulletin directing insurance companies to provide partial premium relief on April 13, 2020, as it became clear that the pandemic was reducing traffic congestion and business losses. He extended his bulletin in May and again in December, directing insurance companies to continue to provide partial premium refunds as long as the pandemic resulted in reduced risk of loss and to report those refunds to him. The Department has posted those reports publicly on our website.
Commissioner Lara’s orders included commercial insurance coverage and, today, he announced that he is seeking detailed data about commercial insurance losses dating back to last March.
“We know that for business owners, any savings matters while they are desperately trying to keep their doors open,” said Commissioner Lara. “If the data shows that insurance companies overcharged our businesses, I am going to be mandating them to return premium, especially to small business that have borne the brunt of pandemic closures.”
"We applaud Commissioner Lara's efforts to address the needs of California's small businesses as they continue to face setbacks from the pandemic," said Mark Herbert, Managing Director of California for Small Business Majority. "Every dollar counts during this challenging time, which is why it's important that commercial insurance companies share data about the amount of premiums they've returned to their small business clients. This will help ensure that small businesses are receiving their fair share of reimbursements, allowing them to put more money back into their businesses."
The commercial insurance data is expected to be available later this summer.
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Lonce Lamonte, editor, lonce@adjustercom.com, with the California Department of Insurance, March 11th 2021
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