May 24, 2022

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California pushes for auto insurance refund checks due to less driving during pandemic

Three auto insurance companies in California are receiving increased pressure from the state to issue auto insurance refunds due to the lack of driving during the pandemic.  (iStock)

California is taking action against three auto insurance companies, directing them to reimburse their drivers for premiums they were charged at the start of the pandemic. 

The three companies in question include Allstate Northbook Indemnity, Mercury Insurance and CSAA Insurance Exchange, which provide insurance to about 20% of Californian drivers, according to an Oct. 6 press release from the state’s department of insurance. 

Data analysis by the department showed these companies had the greatest gap between what they initially refunded drivers, and what the department said they should have refunded.

“Last year as the pandemic hit, millions of Californians stayed home to save lives,” California Insurance Commisioner Ricardo Lara said in a statement. “We drove less, lowering risks for other drivers on the road. And because of that, I ordered insurance companies to return money to drivers. New data shows these three insurance companies have the largest gap between what they did and what they should have done to provide further premium relief for their policyholders.”

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State leaders say they are “out of patience” with insurers

Last year during the COVID-19 pandemic, California auto insurance companies refunded more than $2.4 billion in premium relief to drivers – which was the most out of any other state in the U.S., the press release said. But despite this, Lara said the contributions from the three companies he addressed was not enough. 

“On behalf of consumers, I am out of patience,” Lara said. “These insurance companies have 30 days to tell us once and for all how they are going to make it right before we take further action.”

The department found that from March to September of 2020, insurance groups made adjustments and returned an average of 9% in car insurance refunds after Lara ordered that “appropriate refunds” be made to all drivers. However, in March 2021, the department said its data showed that 17% of premiums should have been given in relief payments due to the insurance companies’ risk of loss falling dramatically.

“During the pandemic, Californians drove much less but continued to pay pre-pandemic premiums for auto insurance. Insurance companies are holding on to an unearned windfall captured during an unprecedented crisis, and they must return the excess they collected after COVID changed everything,” Douglas Heller, insurance expert for Consumer Federation of America, said. “We appreciate Commissioner Lara’s persistence in holding insurance companies accountable and fighting to get policyholders their money back.”

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California to continue analyzing refund data

The state gave the three car insurance companies 30 days from its order on Oct. 5 to respond. But Lara says it will not end there as the state will continue to analyze new data as it becomes available to see if it believes more consumers should be provided relief. 

“While some insurance companies have provided some relief, our department will continue to seek out and analyze data to make sure all insurance companies adhere to my orders,” Lara said. “Protecting consumers is my top priority. We will use every means we have available to hold insurance companies accountable for their actions during the pandemic.”

Earlier this year, Lara also ordered insurance companies to continue to provide “appropriate premium refunds or credits.”

If you are interested in saving on your auto insurance premiums, you can visit an online marketplace like Credible to compare quotes from multiple companies at once and choose the best insurance policy for you. Contact Credible to speak to an auto insurance expert and get all of your questions answered today.

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