California Insurance Commissioner Ricardo Lara has issued an order for three insurance companies – Allstate Northbrook Indemnity Company, Mercury Insurance, CSAA Insurance Exchange – to reimburse the excess premiums they collected from Californian auto insurance customers, or face legal action.
According to a statement from the commissioner’s office, the three insurers insure approximately 20%, or a fifth, of all California drivers.
The California Department of Insurance (CDI) said that further analysis of data sent by insurers reveals that these three companies have the greatest gap between what they initially refunded drivers and the amount they should have refunded consumers.
Data collected by the CDI found that from March to September 2020, insurers returned on average 9% of auto premiums. But the department’s analysis found that they should have refunded nearly double that amount – 17% – over the seven-month period.
The three insurance companies named in Lara’s order have 30 days from October 05, 2021 to respond, a release from the commissioner’s office said.
“Last year as the pandemic hit, millions of Californians stayed home to save lives. We drove less, lowering risks for other drivers on the road. And because of that, I ordered insurance companies to return money to drivers,” said Lara. “New data shows these three insurance companies have the largest gap between what they did and what they should have done to provide further premium relief for their policyholders.”
“During the pandemic, Californians drove much less but continued to pay pre-pandemic premiums for auto insurance. Insurance companies are holding on to an unearned windfall captured during an unprecedented crisis, and they must return the excess they collected after COVID changed everything,” added Consumer Federation of America insurance expert Douglas Heller.
Lara had ordered all P&C insurers doing business in California to make appropriate insurance premium refunds shortly after Governor Gavin Newsom’s “stay-at-home” order during the onset of the COVID-19 pandemic in March 2020. But as the pandemic continued, the commissioner extended the refund order through June 2020 and beyond “as conditions warrant.”