Californians Could See More Money By Way of Car Insurance Refunds

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Insurance commissioner Ricardo Lara ordered three auto insurance companies — Allstate, Mercury and CSAA — to reimburse California drivers for the excess premiums they were charged despite driving less during the start of the pandemic or face legal action, according to the California Department of Insurance. Together, these companies insure 20% of California drivers.

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These companies have the greatest gap between what was refunded to California drivers and what should have been refunded since the beginning of the pandemic.

“Last year as the pandemic hit, millions of Californians stayed home to save lives. We drove less, lowering risks for other drivers on the road,” said commissioner Lara. “On behalf of consumers, I am out of patience. 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.”

California drivers continued to pay pre-pandemic premiums for auto insurance and insurance companies are holding on to an “unearned windfall” which must be returned, explained Douglas Heller, insurance expert for Consumer Federation of America. “We appreciate commissioner Lara’s persistence in holding insurance companies accountable and fighting to get policyholders their money back.”

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In March 2020, Lara ordered all property and casualty insurance companies doing business in California to make appropriate premium refunds to consumers. This was extended through June 2020 and beyond “as conditions warrant.”

Recently in March 2021, Lara ordered insurance companies to continue to provide refunds or credits. Department data showed that the risk of loss had fallen substantially, and insurance companies had overcharged consumers.

Under Proposition 103, Lara has the authority to make sure rates are handled fairly, the Los Angeles Times reports. Companies that violate this law face as much as $10,000 per person overcharged. Actions have resulted in $2.4 billion in premium relief to drivers, the most refunded nationwide, according to the California Department of Insurance.

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The Department also found that between March and September 2020, insurance companies returned on average 9% of auto premiums; however, it should have been nearly double at 17%.

The L.A. Times did note that insurers claim to have complied with guidance from state officials.

“Not only did we lead to support drivers, but we’ve been there for Californians throughout the wildfires by paying thousands of insurance claims and extended our coverage offerings this year to help alleviate the homeowners’ insurance availability crisis,” Allstate said in a statement.

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Mercury also released a statement saying the company has returned more than $175 million in premiums to California customers and “continues to provide ongoing premium relief to hundreds of thousands of customers who are driving less as a result of the pandemic.”

Allstate, Mercury and CSAA have 30 days from Oct. 5 to respond.

Last updated: Oct. 12, 2021

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About the Author

Josephine Nesbit is a freelance writer specializing in real estate and personal finance. She grew up in New England but is now based out of Ohio where she attended The Ohio State University and lives with her two toddlers and fiancé. Her work has appeared in print and online publications such as Fox Business and Scotsman Guide.
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