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California insurance companies ordered to give premium refunds due to coronavirus pandemic

California Insurance Commissioner Ricardo Lara ordered insurance companies to return insurance premiums to consumers and businesses and provide much-needed financial relief during the coronavirus pandemic.

The order covers premiums paid for in March and April, and May if shelter in place restrictions continue, in at least six different insurance lines: private passenger automobile, commercial automobile, workers’ compensation, commercial multi-peril, commercial liability, medical malpractice, and any other insurance line where the risk of loss has fallen substantially as a result of the coronavirus pandemic.

The order also requires insurance companies to provide a premium credit, reduction, return of premium, or other appropriate premium adjustment as soon as possible, and no later than August 2020.

“With Californians driving fewer miles and many businesses closed due to the COVID-19 emergency, consumers need relief from premiums that no longer reflect their present-day risk of accident or loss,” said Lara. “Today’s mandatory action will put money back in people’s pockets when they need it most.”

Several auto insurance companies have recently announced voluntary premium refunds to drivers. Today’s order extends these private personal auto policy reductions to more companies and adds commercial lines while monitoring insurance companies’ compliance with California’s consumer protection laws so that refunds are not discriminatory or inadequate.

A premium refund will not require prior approval by the Department of Insurance if an insurance company follows certain methods outlined in the bulletin., such as using an average percentage based on estimated change in risk or exposure. Consumers will also have the opportunity to provide their individual actual or estimated experience to their insurance company. 

In order to provide oversight and ensure companies are complying with the bulletin, Lara ordered insurance companies to report back to the Department of Insurance all premium refunds they have issued or expect to issue within 60 days.

Lara has already requested at least a 60-day grace period for policyholders to pay their premiums so that insurance policies are not canceled for nonpayment of premium during this challenging time. Together, these two actions will give consumers and businesses substantial financial relief.

“I applaud efforts made by insurance companies to date that have offered grace periods and flexibility to consumers and businesses during this national emergency,” Lara said. “We must do more to help our hard-working families and small businesses.”

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