INSURANCE COMPANIES MUST ISSUE REFUNDS TO CALIFORNIANS IMPACTED BY COVID 19 FOR AUTO, BUSINESS, AND OTHER POLICIES

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By Miriam Raftery

April 18, 2020 (Sacramento) --  With many businesses closed or having employees work at home, California Insurance Commissioner Ricardo Lara has found that risks of losses are reduced. So on April 13, the Commissioner ordered insurance companies to issue refunds or credits within 120 days to policyholders adversely affected by COVID-19 including:

  • Private passenger and commercial automobile insurance
  • Workers’ compensation insurance
  • Commercial liability insurance
  • Commercial multiple peril insurance
  • Medical malpractice insurance
  • Any other lines of coverage where risks have dropped due to the pandemic.

A U.C. Davis special report on impacts of COVID-19 found reduced driving has resulted in fewer accidents, injuries and fatalities. The Consumer Federation of California Education Foundation had petitioned for a hearing to reduce auto insurance premiums.

Commissioner Lara found, however, that reduced risks extend to other types of insurance as well. For example, businesses that are shut down have reduced payrolls, miles driven, and risks of on-the-job accidents. Medical professionals furloughed by shutdowns of non-critical facilities have lower malpractice risks for the year.

Insurers may comply with the premium refund order by providing a premium credit, reduction, return or premium, or other appropriate premium adjustment Insurers can either reclassify exposures (such as reclassifying a personal car from “commute use” to “pleasure use”) or reduce the exposure base (such as lower miles driven, payroll, etc.).

If the COVID-19 pandemic extends beyond May, Commissioner Lara indicated he will send another bulleting to insurance companies, potentially extending refunds for additional weeks or months.

Consumers should read any notices from insurers, who may ask for information such as updated mileage estimates. 

Consumers and businesses impacted by COVID-19 may wish to contact their insurance companies to find out how much your rates will be lowered, and how each company will handle refunds.

Read the Insurance Commissioner's bulletin.