California automobile insurance companies have agreed to provide $1.21 billion in savings to drivers, the state insurance department says.
Insurance Commissioner Ricardo Lara in May issued an order requiring insurers to provide premium relief to policyholders affected by the COVID-19 pandemic.
The $1.21 billion figure includes $1.03 billion in premium relief for more than 18 million policyholders for the months of March, April, and May while Californians struggled during the start of the COVID-19 pandemic, and an additional $180 million in future rate increases that insurance companies reduced in response to the Commissioner’s orders.
“More than $1.2 billion in premium relief and reduced future premiums represents actual savings for California policyholders, many of whom have been hit hard by the COVID-19 crisis,” Commissioner Lara said in a departmental release. “We are still seeing fewer accidents and insurance claims during the pandemic, and I expect the savings to keep growing.”
The premium relief per policy for the months of March through May as reported by the 25 largest insurance companies ranges from $19 to $155, depending on the cost of the policy and the company’s formula for providing relief. The overall average relief per policy for the top 25 carriers is $57 or 3.63 percent of a policyholder’s annual premium.
Approximately half the companies returned premium to drivers in the form of a refund or dividend, while the rest offered a credit against future premiums.
Commissioner Lara also urged insurance companies to review their recently submitted rate filings in light of the COVID-19 emergency’s effect on policyholders’ risk. As a result, dozens of auto insurance rate filings pending review by the Department of Insurance were withdrawn or significantly reduced representing $180 million in further savings for drivers compared to what insurers initially sought to charge consumers in the coming months.
The Department of Insurance is still analyzing reports submitted by insurance companies for the automobile market and also for commercial lines included in the Commissioner’s Bulletins and will have further data available in the future.
In a media release, the Consumer Federation of America (CFA) and the Center for Economic Justice (CEJ) applauded Commissioner Lara for his leadership, saying his actions reflect the data and analysis that CFA and CEJ have been providing since mid-March.
The consumer advocacy groups say driving declined nationally during March, April and May due to the shut downs resulting from the COVID-19 pandemic.
In a letter sent to all state insurance commissioners, CFA and CEJ called on all commissioners to follow Lara’s lead to ensure drivers do not face excessive premiums.
Source: CDI, CFA, CEJ
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