Cal­i­for­nia or­ders in­surance pre­mium re­funds dur­ing out­break

Times Standard (Eureka) - - LO­CAL NEWS - By Adam Beam

SACRA­MENTO » Cal­i­for­nia’s in­surance com­mis­sioner on Mon­day or­dered some com­pa­nies to re­fund pre­mi­ums for March and April be­cause of the coro­n­avirus, is­su­ing a broad di­rec­tive that in­cludes pay­ments made for work­ers com­pen­sa­tion, med­i­cal mal­prac­tice and pri­vate and com­mer­cial auto poli­cies.

The or­der from Ri­cardo Lara is based on a voter-ap­proved law from 1988 that gives the in­surance com­mis­sioner au­thor­ity to ap­prove rates be­fore they go into ef­fect. The law also says no rate will “re­main in ef­fect” that is ex­ces­sive, ad­e­quate or un­fairly dis­crim­i­na­tory.

In­surance com­pa­nies set rates based on the how much risk is in­volved, us­ing his­tor­i­cal data to make those cal­cu­la­tions. But since midMarch, most of Cal­i­for­nia’s busi­ness sec­tor has come to a halt be­cause of the spread of the coro­n­avirus. Gov. Gavin New­som, a Demo­crat, is­sued a statewide “stay-ath­ome” or­der on March 19 that closed schools and nonessen­tial busi­nesses.

Since then, traf­fic even in San Fran­cisco and Los An­ge­les has vir­tu­ally dis­ap­peared, elec­tive surg­eries have been can­celed and more than 2 mil­lion Cal­i­for­ni­ans have filed for un­em­ploy­ment ben­e­fits.

A re­port by the Univer­sity of Cal­i­for­nia-Davis found that in the week af­ter New­som’s or­der, traf­fic col­li­sions dropped by 55% and in­juries and deaths from traf­fic ac­ci­dents fell 53%.

“Con­sumers need re­lief from pre­mi­ums that no longer re­flect their present­day risk of ac­ci­dent or loss,” Lara said in state­ment an­nounc­ing the or­der. “To­day’s manda­tory ac­tion will put money back in peo­ple’s pock­ets when they need it most.”

The or­der cov­ers pre­mi­ums for March and April, but could be ex­tended if clo­sures con­tinue.

David Samp­son, pres­i­dent and CEO of the Amer­i­can Prop­erty Ca­su­alty In­surance As­so­ci­a­tion, crit­i­cized the or­der and said Cal­i­for­nia should let the pri­vate mar­ket re­solve the sit­u­a­tion.

He noted in­sur­ers have al­ready an­nounced bil­lions of dol­lars in pre­mium re­lief in re­cent weeks. That in­cludes in­surance gi­ant All­state, which an­nounced last week it would re­turn 15% of pre­mi­ums in March and April to most cus­tomers, amount­ing to about $600 mil­lion, ac­cord­ing to a reg­u­la­tory fil­ing.

“Now is not the time for ar­bi­trary calls for rate de­ci­sions,” Samp­son said. “Cal­i­for­nia has the most com­plex reg­u­la­tory struc­ture in the na­tion. The Depart­ment should be pro­vid­ing guid­ance to com­pa­nies that are try­ing to im­ple­ment pre­mium re­duc­tions.”

Mon­day’s or­der is one of a num­ber of ac­tions from state regulators aimed at re­liev­ing fi­nan­cial pres­sure on res­i­dents and busi­nesses from the coro­n­avirus clo­sures. In Cal­i­for­nia, in­come taxes, mort­gage pay­ments and evic­tions have been de­layed through a com­bi­na­tion of gov­ern­ment or­ders and in­dus­try agree­ments.

But in­surance pre­mi­ums are unique be­cause they are based on risk. In Alaska, the di­rec­tor of the state’s Di­vi­sion of In­surance is­sued a bulletin last month urg­ing in­sur­ers to re­duce or re­fund pre­mi­ums.

In­surance com­pa­nies have 120 days to com­ply, and Lara’s or­der gives them sev­eral op­tions. They can re­fund pre­mi­ums, re­duce them or give cus­tomers a credit. Re­funds can be based on an es­ti­mated change in risk, with amounts based on an aver­age per­cent­age.

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