Auto Insurance

California Acts to Protect Auto Insurance Consumers from Paying COVID-19 Windfall Profits to Insurers

Consumer Groups Urge Other States to Take Action Needed to Prevent Billions of Dollars of Overcharges

Washington, D.C. – Today, California Insurance Commissioner Ricardo Lara announced that the California Department of Insurance requires auto insurers to continue their COVID-19 related premium refunds to policyholders from April and May, previously directed by the Commissioner, through June and to continue providing relief for any period after June as conditions warrant based on actual insurer claims experience reported to the insurance department.

Consumer Federation of America (CFA) and the Center for Economic Justice (CEJ) applaud Commissioner Lara for his leadership in protecting consumers from the excessive auto insurance premiums resulting from dramatic drops in crashes and insurance claims as roads emptied because of the pandemic.  Commissioner Lara’s actions reflect the data and analysis that CFA and CEJ have been providing since mid-March.

Driving declined sharply throughout the nation during the months of March, April, and May as a result of stay-at-home orders, job losses, business closures, and school closures. While miles driven and auto crashes are slowly increasing from the nadir this spring, the pandemic’s impact on auto insurance risk exposure is far from over and will last for many months.  Indeed, as COVID-19 daily case counts again set record levels in the United States, many Americans are still working from home due to safety concerns, scores of businesses and venues remain closed, and many consumers remain laid off or unemployed.  Even after the pandemic ends, when a safe and effective vaccine is widely available, driving will not likely return to pre-pandemic levels as many businesses have closed for good, many others (such as Nationwide Mutual Insurance Company and Twitter) have decided to allow more of their employees to work from home, and society generally will take time to adjust to a new post-pandemic normal.

State insurance regulators have the responsibility to protect auto and other insurance consumers from overcharges – “excessive rates.”  As a result of the pandemic, this mandate must translate into action to compel insurers to provide the premium relief that matches the reduction in claims from the levels expected when the rates were filed with the regulator.  While most insurers offered some type of relief – with the remarkable exception of non-standard insurers serving low-income and minority communities – that relief was generally limited to April and May premiums and ranged from very inadequate to adequate.  Fewer than 10 of the almost 200 auto insurers in the nation are providing relief for June or July.

In a letter sent to all state insurance commissioners today, CFA and CEJ stated these facts and called for action by the states.

“It is urgent that insurance departments take action now to require auto insurance premium refunds for consumers for June and the coming summer months,” said J. Robert Hunter, CFA’s Director of Insurance and former Texas Insurance Commissioner.  “It is clear that from the moment the pandemic began and roads emptied, auto insurance rates in every state became excessive and action by regulators to protect consumers was and remains needed.”

Contact: J. Robert Hunter, 703-528-0062