California insurance commissioner orders refunds for auto coverage because of driving reduction

Apr. 14--California's insurance commissioner on Monday ordered insurance companies operating in the state to refund at least a portion of premiums for automobile insurance -- and other consumer and commercial coverage -- for March and April given the dearth of driving because of stay-at-home rules in place to combat spread of the coronavirus.

Ricardo Lara's action most notably applies to residential and commercial auto policies statewide. But it also includes workers compensation, medical malpractice and commercial multiple peril and liability coverage.

"With Californians driving fewer miles and many businesses closed due to the COVID-19 emergency, consumers need relief from premiums that no longer reflect their present-day risk of accident or loss," Lara said in a statement. "Today's mandatory action will put money back in people's pockets when they need it most."

Lara has the authority under voter-enacted Proposition 103 to protect consumers from excessive insurance rates and courts have backed up the insurance commissioner's power to require interim rates under certain circumstances to prevent excessive charges or discriminatory practices, according to his spokesman.

Gov. Gavin Newsom's statewide public health emergency order to largely stay home has meant a decline in traffic and that has caused an estimated 15,000 fewer collisions per month and 6,000 fewer monthly accidents causing injury or death, according to a UC Davis study released earlier this month.

Lara's directive comes as some insurers such as GEICO already were taking action to reduce auto premiums and issue refunds to customers. But the insurance commissioner's move was criticized by a top insurance industry trade group, the American Property Casualty Insurance Association, which called it arbitrary since the insurers made billions of dollars of rate relief to policyholders over the past two weeks.

"Now is not the time for arbitrary calls for rate decisions. We urge all stakeholders to support flexibility in the marketplace. California has the most complex regulatory structure in the nation," said David Sampson, CEO of the property casualty insurance group. "The Department should be providing guidance to companies that are trying to implement premium reductions within the confines of Proposition 103."

State Farm auto insurance customers should expect to receive a rebate of 25% on average for premiums owed during the period from March 20 from May 31, spokeswoman Angie Harrier said. On average, that will be about $20 per month.

Lara's order for insurance premium refunds would continue into May if the shelter-in-place rules are still in effect and insurers would have to apply the refund by no later than August. Insurers also would have to report to the state insurance department within 60 days all premium refunds they have paid or expect to issue.

"I applaud efforts made by insurance companies to date that have offered grace periods and flexibility to consumers and businesses during this national emergency," Lara said. "We must do more to help our hardworking families and small businesses."

You can reach Staff Writer Bill Swindell at 707-521-5223 or [email protected].

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