Insurance companies ordered to give refunds to Californians due to coronavirus

Drivers and business owners in California should get at least partial refunds on no less than two months’ worth of insurance premiums because of the coronavirus-induced restrictions that have slashed commutes and shut companies’ doors, the state insurance commissioner’s office ordered Monday.

Commissioner Ricardo Lara ordered insurance companies to adjust insurance premiums covering March and April, since less activity means lower risk in several categories. Californians could also see refunds for their May premium payments if stay-at-home restrictions extend into next month.

“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.”

The order to retroactively adjust insurance premiums applies to at least the following coverage areas: private passenger and commercial auto insurance; workers’ compensation; commercial multi-peril, which covers a variety of losses; commercial liability; and medical malpractice.

Refunds are also required in “any other insurance line where the risk of loss has fallen substantially as a result of the COVID-19 pandemic,” Lara’s office said in the statement.

Customers should receive the refunds no later than August. They should come in the form of a premium credit, reduction, return or some other form of adjustment, the state Insurance Department said.

The department isn’t currently saying how big the refunds should be because factors can vary by policy and insurer, according to the department spokesman.

The American Property Casualty Insurance Assn. expressed dissatisfaction about Lara’s order. In a statement, the trade group said that “private competitive markets will work to the benefit of consumers” if insurers are given more flexibility. It noted that some insurers had already committed to issuing refunds.

“Now is not the time for arbitrary calls for rate decisions,” David A. Sampson, the group’s chief executive, said in the statement.

Under the terms of the order, each insurance company will create a plan for refunds — either giving the same adjustment to all its policyholders or assessing the policies on a case-by-case basis. Those plans will then be scrutinized by the state Insurance Department’s actuaries to make sure the refund amounts are adequate when compared with projections of how much, say, driving or payroll has decreased, the department spokesman said.

Policyholders are to get an explanation of the adjustment from their insurer, as well as any changes to what’s known as classification or exposure basis. For example, a car used by someone who now doesn’t drive to work may be reclassified from commuter use to pleasure use, which can have a cheaper premium.

Policyholders don’t need to do anything to get the refund, the department spokesman said. Insurance companies should respond to the commissioner’s order and then contact policyholders.