Despite the majority of Californians driving less last year, most auto insurance companies operating in the state continued to charge pre-pandemic rates, managing to collect a windfall of about $5.5 billion, new analysis by Consumer Watchdog has found.
The consumer advocate group noted that the newly published 2020 data suggested that although accident claims dropped as most vehicles remained parked, insurers failed to reduce rates accordingly. Thus, insurers’ average return on net worth was over twice what California law allows last year.
Consumer Watchdog also pointed out that since April 2020, California insurance commissioner Ricardo Lara issued four bulletins that directed insurers to refund overcharges. In March 2021, Lara set an April 30, 2021 deadline for insurers to repay outstanding refunds from last year, and the firms were even allowed to calculate for themselves what they still owed to their customers.
But the top 15 auto insurers – which represent 70% of the market – have only repaid about $1.9 billion for 2020.
"Asking insurers to calculate their own refunds hasn't resulted in consumers getting what they're owed. Insurance companies are hanging on to billions of drivers' dollars that should be helping Californians get back on their feet as we emerge from the pandemic,” said Consumer Watchdog executive director Carmen Balber. “The insurance commissioner must require companies to refund past overcharges in full, with interest, and make sure rates are not excessive going forward.”
Consumer Watchdog has stated that overcharge data for 2021 is not yet available, but noted that the pandemic has continued to affect the economy and traffic patterns. Accident rates are still not what they were before March 2020, the group pointed out, which suggests that insurers owe consumers “billions more” for the first six months of 2021.
It was also mentioned by Consumer Watchdog that auto insurers have so far repaid less than $100 million for 2021.