Premiums to be refunded to those impacted by COVID-19

The state of California issued an order late Monday to demand insurers refund premiums to drivers and businesses impacted by COVID-19. 

Insurance Commissioner Ricardo Lara is requiring insurance companies issue an initial premium refund for the months of March and April within the next 120 days.

The order goes beyond auto premiums to include private passenger automobile insurance, commercial automobile insurance, workers compensation insurance, commercial multiple peril insurance, commercial liability insurance, medical malpractice insurance, and any other line of coverage where the measures of risk have lowered due to the pandemic. 

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"Commissioner Lara did the right thing, but we wish he would have done it sooner," said Carmen Balber, the Executive Director for Consumer Watchdog.

Balber said the auto premium refunds are long overdue. There are policies where premiums are based partly on measures of risk such as the number of miles driven, which has dropped significantly due to the pandemic. 

"With everyone sheltering at home, not driving, not commuting and not causing accidents because of it, California consumers are due a premium refund. Consumer Watchdog joined consumer organizations across the country to call on state insurance commissioners to start issuing refunds for consumers over a month ago," said Balber. 

Some companies have already offered rebates to customers. On Monday, the AAA Auto Club announced $125 million in financial relief for auto insurance policyholders who insure their vehicles through the Interinsurance Exchange of the Automobile Club and its affiliate insurers. 

"Every policyholder with auto insurance in effect from March 16 through May 15 of this year will be receiving a refund of 20 percent, a policy refund of 20 percent. Members don't have to do a thing, we will be mailing out those checks by the end of May," said Doug Shupe, a spokesperson for the Auto Club of Southern California. 

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Shupe said the announcement is due to reduced driving and claims because of the stay-at-home and shelter-in-place orders issued in California. Shupe said the company is also giving a $1 million donation to United Way, and offering free roadside assistance to all medical staff and first responders. 

"They're out there on the front lines. They're saving lives and if they get stranded on the side of the freeway, we want to get to them and get them on their way as quickly as possible," said Shupe. 

The insurance companies must provide a premium credit, reduction or return of premium to customers. The companies are required to alert the Department of Insurance of all refunds within 60 days. 

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Balber believes more needs to be done to ensure fair refunds. 

"The Insurance Commissioner [Ricardo Lara] has to require the insurance companies to provide the data to back up the discounts they're providing to consumers and make them do it as quickly as possible," said Balber.