California Insurance Commissioner Tells Companies to Refund Consumers’ Premiums

Ryan J. Farrick — May 20, 2020

An empty road. Image via Flickr/user:span112. (CCA-BY-2.0).

Insurance Commissioner Ricardo Lara has said insurers must offer partial premium refunds–or other means of compensation–to reflect decreased use during the pandemic.

California’s insurance commissioner has ordered insurers in the state to return partial premium refunds to consumers and businesses.

According to Business Insurance, this is the second such order issued by California Insurance Commissioner Ricardo Lara.

Lara’s latest order requires that insurers adjust consumers’ premiums. Carriers can do that by offering a credit, reducing rates, or returning a portion of payments. Companies will have to take action by August 11^th, with each carriers’ plan to be vetted by the California Department of Insurance to ensure that refunds “are adequate and reflect the reduced risk.”

Business Insurance reports that Lara’s mandate impacts many different forms of insurance. It affects lines such as workers’ compensation, private passenger automobile, commercial automobile coverage, commercial multi-peril, commercial liability, and medical malpractice.

Lara—along with his several of his counterparts in different states—ordered insurers to reduce or refund premiums due to under-use during shelter-in-place orders.

Individuals wearing masks during coronavirus outbreak; Image via Pixabay. Public domain.

“With the vast majority of Californians still under “stay at home” orders, the risk of accident and loss remains low for many lines of insurance and their premiums should reflect that,” Lara said in a statement. “While I appreciate companies that have already taken action to return premiums, the Department of Insurance will be checking that the reductions are adequate and consumers and businesses are not shortchanged.”

Lara has also asked that insurance agents and brokers—as well as all other businesses that accept payment on behalf of carriers—allow consumers to make “prompt” premium payments which do not necessitate face-to-face interaction.

Similarly, Lara requested that insurance companies extend grace periods for consumers with past-due accounts.

“Consumers who have lost their jobs or businesses due to the crisis deserve flexibility in paying their premiums, just like any other,” Lara said. “I am asking insurance companies to be mindful of the revenue streams Californians have consistently provided to insurers over the years, stand with their customers in this crisis and extend grace periods an additional 60 days.”

Lara, as LegalReader.com wrote last month, had previously ordered automobile insurance companies to refund premiums to reflect the sudden decrease in travel caused by California’s shelter-in-place laws.

“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 April. “Today’s mandatory action will put money back into people’s pockets when they need it most.”

Both orders featured additional concessions for commercial businesses and medical professionals, the latter of whom will receive some cash back on malpractice payments.