Commissioner Lara orders Allstate, Mercury, and CSAA to “close the gap” on auto insurance refunds owed to drivers who drove less during the pandemic

News: 2021 Press Release

LOS ANGELES — Insurance Commissioner Ricardo Lara today directed three auto insurance companies to reimburse California drivers the excess premiums they were charged from the start of the pandemic, or face legal action. The Commissioner’s order is directed at Allstate Northbrook Indemnity Company, Mercury Insurance Company, and CSAA Insurance Exchange. Together, these companies insure approximately 20 percent of all California drivers.

Further analysis by the California Department of Insurance of data received directly from auto insurance companies shows these three auto insurance companies have the greatest gap between what they initially refunded drivers, and what they should have refunded, to provide proper premium relief to their policyholders since the start of the COVID-19 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. And because of that, I ordered insurance companies to return money to drivers,” said Commissioner Lara, whose action has resulted in more than $2.4 billion in premium relief to drivers — the most refunded back to drivers out of the entire country. “New data shows these three insurance companies have the largest gap between what they did and what they should have done to provide further premium relief for their policyholders. 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.”

“During the pandemic, Californians drove much less but continued to pay pre-pandemic premiums for auto insurance. Insurance companies are holding on to an unearned windfall captured during an unprecedented crisis, and they must return the excess they collected after COVID changed everything,” said 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.”

Shortly after Governor Gavin Newsom issued “stay-at-home” orders to help stop the spread of the pandemic in March 2020, Commissioner Lara ordered all property and casualty insurance companies doing business in California in lines of insurance impacted by the pandemic to make appropriate premium refunds to consumers. As the pandemic continued, Commissioner Lara extended his refund order through June 2020 and beyond “as conditions warrant.”

Most recently, in March of 2021, Commissioner Lara ordered insurance companies to continue to provide appropriate premium refunds or credits as the Department obtained further data showing the risk of loss had fallen dramatically, and insurance companies had overcharged consumers.

The Department’s analysis found that, from March to September 2020, insurance company groups returned on average 9 percent of auto premiums, but the Department’s analysis found they should have refunded nearly double that amount —17 percent — over the seven-month period. As a result, many insurance companies overcharged consumers for their private passenger automobile.

The three insurance companies named in the order have 30 days from October 5, 2021, to respond.

“While some insurance companies have provided some relief, our Department will continue to seek out and analyze data to make sure all insurance companies adhere to my orders,” added Commissioner Lara. “Protecting consumers is my top priority. We will use every means we have available to hold insurance companies accountable for their actions during the pandemic.”

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Media Notes:

• Letter to Allstate
• Letter to Mercury
• Letter to CSAA
• March 11, 2021 Bulletin: Premium Refunds, Credits, and Reductions in Response to COVID-19 Pandemic.
• Commissioner Lara issued his first bulletin directing insurance companies to provide partial premium relief on April 13, 2020 (Bulletin 2020-3). He extended this order in two follow-up bulletins on May 15, 2020 (Bulletin 2020-4) and December 3, 2020 (Bulletin 2020-8). The bulletins directed insurance companies to report to the Department of Insurance how much premium they returned, whether it was a partial refund, dividend, credit or other form of payment, and other measures. View insurance company reports at the Department of Insurance website.
• The Commissioner’s action saved consumers more than $2.4 billion in 2020 through returned premiums.
• The Commissioner’s review included California’s top 10 insurance groups, covering 80 percent of the market. View the private passenger automobile insurance market share report.