As a result, insurance companies' average return on net worth – a measure of profitability that includes premiums and investment income – was more than twice what
Since April of 2020, Insurance Commissioner
"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. The Insurance Commissioner must require companies to refund past overcharges in full, with interest, and make sure rates are not excessive going forward," said
Data on 2021 overcharges is not yet available. However the pandemic has continued to affect the economy and traffic patterns and accident rates were not what they were before March of 2020, indicating that insurance companies owe consumers billions more for the first six months of 2021. Companies have so far repaid less than
Proposition 103 Mandates Refunds for Excessive Rates
The Insurance Commissioner has the power – and the obligation – under voter approved Proposition 103 to require companies to refund these overcharges. Prop 103 requires all auto, home and business insurance companies to maintain rates that are neither "excessive" nor "inadequate." Companies are also required by law to open their books and justify their rates. A longstanding formula prohibits insurance companies from collecting excessive profits. Proposition 103 made the office of Commissioner an elective post and gave the Commissioner full authority to order refunds.
"Many Californians are struggling to pay their bills in the aftermath of the shutdown. Insurance companies cannot be allowed to keep billions in illegal overcharges," said Balber.
Analysis Based on 2010-2020 Industry Data on Profits, Claims
Consumer Watchdog's analysis is based on profit and loss data compiled from insurers' annual statements by the
See the calculations. https://www.consumerwatchdog.org/california-auto-insurance-covid-loss-ratios
An actuarial analysis by
See the calculations. https://www.consumerwatchdog.org/california-auto-insurance-covid-profits
Actual experience makes clear that the lower that insurance companies' loss ratios go – the more of each premium dollar they keep for themselves (as they did with 2020's 52.7% loss ratio) – the higher companies' return on net worth climbs. This relationship is shown in the graph seen here. https://www.consumerwatchdog.org/sites/default/files/2021-06/CAPPAPONWGraph.pdf
Read Consumer Watchdog's letter to Commissioner Lara in April, 2020, urging him to place a moratorium on approval of any new rate increases until the end of the pandemic.
Commissioner Lara's bulletins urging insurance companies to refund policyholders can be found here. http://www.insurance.ca.gov/0400-news/0100-press-releases/2021/release030-2021.cfm
Reports by insurance companies on how much they have voluntarily refunded their customers can be found here. http://www.insurance.ca.gov/0250-insurers/0300-insurers/0100-applications/rsb-forms/2020/2020-3-submissions/index.cfm
Read more about voter-approved Proposition 103's protections against insurance company overcharging and other abuses here.
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SOURCE Consumer Watchdog