By Mary O’KEEFE

On Monday California Insurance Commissioner Ricardo Lara ordered insurance companies to return insurance premiums to consumers and businesses and provide much-needed financial relief during the COVID-19 emergency.

“The COVID-19 pandemic has severely curtailed activities of policyholders in both personal and commercial lines. As a result, projected loss exposures of many insurance policies have become overstated or misclassified. This is especially true for policies where premiums are based partly on measures of risk such as number of miles driven, revenue, and payrolls, which have all dropped significantly because of COVID-19,” according to a statement from the insurance commissioner’s office.

According to UC Davis’ Special Report on Impact of COVID-19 on California Traffic Accidents, reduced driving has resulted in fewer accidents, injuries and fatalities on public highways and roads. In addition, the Consumer Federation of California Education Foundation (CFC) on March 23 submitted to the insurance commissioner a Petition for Hearing to redress excessive automobile insurance rates and premiums caused by the COVID-19 pandemic. Commissioner Lara agreed that the overall risk of loss for private passenger automobile insurance is lower due to the pandemic; however, the commissioner also recognizes that these reductions in risk extend beyond the automobile line of insurance referenced in the petition. Accordingly, this bulletin requires broader premium reductions for other lines of insurance in addition to reductions for the private passenger automobile insurance line.

To protect consumers and to provide consistent direction to the insurance industry regarding misclassifications of risk resulting from the COVID-19 pandemic and to address certain issues raised in CFC’s petition, Commissioner Lara ordered insurers to make an initial premium refund for the months of March and April to all adversely impacted California policyholders in the following lines of insurance, as quickly as practicable, but in any event no later than 120 days after the date of the bulletin: 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 become substantially overstated as a result of the pandemic.

If the COVID-19 pandemic continues beyond May, Commissioner Lara will send out a subsequent bulletin to insurers and provide appropriate instructions.

Several insurance companies had sent out information on their COVID-19 response prior to the commissioner’s bulletin release. State Farm Mutual is returning $2 billion in dividends to auto insurance customers. On average, most of State Farm customers will see a 25% policy credit, according to a State Farm statement on March 9.

“With schools and businesses closed, and many of us sheltering in our homes, people are driving less right now, so we’re returning value to customers as we anticipate fewer auto claims,” the statement said. “Customers do not need to take any action to receive this dividend, which will appear as a credit on their policy.”

On average, State Farm Mutual auto customers can expect to receive a credit of about 25% of premium for the time period from March 20 through May 31; exact percentage will vary by state.

“We encourage customers facing financial challenges to call their State Farm agent. At this time, we’re suspending all non-pay cancellations through May 31 – however, customers need to contact their agent to initiate any changes to a recurring monthly auto-pay arrangement,” said Angie Harrier, State Farm spokesperson.

For more information, State Farm customers are encouraged to call their State Farm agent who is working with customers one-on-one to provide payment options, and answer questions.

“Each customer’s situation is unique. A conversation with their agent will help address options such as payment plans and discounts. Many agent offices are running virtually and can assist customers via phone or email,” Harrier added.

Mercury Insurance also announced it would be giving back 15% of monthly auto insurance premiums to customers in April and May. Customers with questions can contact Mercury Insurance at www.mercuryinsurance.com.

Allstate was one of the first companies to announce a COVID-19 response with a 15% money back based on the customer’s monthly premium in April and May. For more information on its response contact an Allstate agent or visit www.allstate.com.

People are advised to contact their individual insurance companies for their responses concerning COVID-19.

  Mary Okeefe