California orders auto insurers to refund customers for overages during pandemic

California is ordering auto insurers to refund customers who officials say may have been overcharged during the coronavirus pandemic.

“Today, Commissioner Lara directed auto insurance companies to report by April 30 how they will return additional premium back to California policyholders that was overcollected in 2020,” a press release from the California Department of Insurance said.

Although auto insurers around the country gave back $14 billion to customers in 2020, California Insurance Commissioner Ricardo Lara said insurers in their state should have almost doubled the amount they gave back, The Wall Street Journal reported.

The state insurance department reviewed the data and said insurers gave back 9 percent of customers’ auto premiums, but it should have been 17 percent.

Companies “continued to overcharge consumers despite drastically reduced risk of accidents and loss due to the ongoing pandemic,” the department said. 

The pandemic and significantly reduced travel in 2020 contributed to a dramatic decrease in mileage and accident claims, leading auto insurers to refund some of their customers’ money.

However, auto insurers are fighting back against the second round of refunds, saying traffic deaths rose last year and driving patterns are unpredictable, the Journal reported.

“This suggests that driver behavior deteriorated rapidly and significantly during the pandemic,” said Loretta Worters, a spokeswoman for the Insurance Information Institute.

California regulators are looking at other sectors, too, for potential refunds. The Journal reported they are looking at commercial insurers, many of whom had less risk as businesses were closed or had limited hours last year.

“If the data shows that insurance companies overcharged our businesses, I am going to be mandating them to return premium, especially to small businesses that have borne the brunt of pandemic closures,” Lara said.

Updated: 4:52 p.m.