California Orders Auto Insurers To Refund Policyholders

California insurance commissioner Ricardo Lara ordered insurance companies to refund policyholders citing fewer accidents following the state’s shelter-in-place order amid coronavirus or Covid-19 crisis.

In a bulletin on Monday, Lara urged companies to return an initial premium paid for the months of March and April. It will be extended through May if stay-at-home restrictions continue.

The companies are required to inform the insurance department within 60 days how they are giving money back to policy holders. Within 120 days, they must also dispense the payback and notify the policy holders.

In the state, Governor Gavin Newsom had declared a statewide State of Emergency on March 4, and the residents were ordered to “shelter-in-place” on March 20 in the fight against the spread of coronavirus.

According to UC Davis’ Special Report on the Impact of COVID-19, reduced driving in the state has reduced collisions and especially injury and fatality collisions on public highways and roads by half.

The bulletin also cites the Petition submitted on March 23 by the Consumer Federation of California Education Foundation or CFC to the Insurance Commissioner to redress excessive automobile insurance rates and premiums caused by the COVID-19 pandemic.

The commissioner noted that the pandemic has severely curtailed activities of policyholders in both personal and commercial lines, and the projected loss exposures of many policies have become overstated or misclassified.

Lara’s order covers various lines of insurance, including insurance for private passenger automobile, Commercial automobile, Workers’ compensation, Commercial multiple peril, commercial liability and medical malpractice. It also includes any other line of coverage where the measures of risk have become substantially overstated as a result of the pandemic.

Many insurers across the nation have already announced premium returns. In early April, auto insurers Allstate Corp. as well as American Family Insurance announced their plans to return some of auto insurance premiums, totaling $800 million, citing less driving

Allstate is providing a Shelter-in-Place Payback of 15 percent of monthly premium in April and May, totaling more than $600 million. Further, American Family Insurance, a smaller auto insurer, would return a total of $200 million to auto insurance customers starting in mid-April. The customers will get about $50 per car insured with the company.

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