Consumer Report Claims Insurers Overcharged California Motorists $5.5B During First Year of Pandemic

Published on


June 29, 2021

Most California insurance companies continued to charge pre-pandemic auto insurance rates despite a vast majority of Californians driving far less last year, according to an analysis by Consumer Watchdog on Tuesday.

The report shows auto insurers reaped “a windfall of about $5.5 billion.”

Insurance companies’ average return on net worth was more than twice what California law allows last year, according to the report.

Since April 2020, California Insurance Commissioner Ricardo Lara has issued four bulletins directing insurers to refund overcharges, and in March he set an April 30 deadline for companies to repay outstanding 2020 refunds.

Lara in March said insurers continued to overcharge drivers despite reduced risk of accidents during the pandemic.

Insurance companies were allowed to calculate for themselves what they owe. As a result, the top 15 auto insurance companies, representing 70% of the market, have only repaid roughly $1.9 billion for 2020, less than half of what they overcharged California consumers, the report shows.

“Insurance companies are hanging on to billions of drivers’ dollars that should be helping Californians get back on their feet as we emerge from the pandemic,” stated Carmen Balber, executive director of Consumer Watchdog. “The Insurance Commissioner must require companies to refund past overcharges in full, with interest, and make sure rates are not excessive going forward.”

According to the American Property Casualty Insurance Association, insurers took “immediate action” to reduce premiums after the pandemic hit, and the auto insurers in 2020 voluntarily provided more than $14 billion in refunds and credits to policyholders for reduced driving during the pandemic, while deploying more than $220 million in philanthropic contributions during COVID-19 to support local communities.

Mark Sektnan, APCIA’s vice president, said that insurers continue to work with policyholders to adjust their policies in 2021, and are encouraging policyholders to communicate any reduction in their driving habits to their insurer to discuss adjustments in premiums if those changes have not already happened automatically.

“Insurers are reporting the appropriate data to the California Department of Insurance,” said Sektnan. “Insurers are always looking at their book of business to manage their risk and provide accurate rates to their policyholders in California’s competitive marketplace.”

The California Department of Insurance have been reached out to for comment.

Companies have so far repaid less than $100 million for 2021, the report shows.

Consumer Watchdog’s analysis, which is based on profit and loss data compiled from insurers’ annual statements by the California Department of Insurance and the National Association of Insurance Commissioners, reflect the impact of the virus shutdown in which accidents and projected claims payouts fell as most people and their cars sheltered in place.

California auto insurance company loss ratios averaged 52.7 cents for every premium dollar charged in 2020, a drop of 11.8% from the average 64.5 cents for every dollar charged in 2019, according to Consumer Watchdog.

Consumer Watchdog
Consumer Watchdog
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