CADOI COVID-19 Premium Reductions

Insurance Commissioner Ricardo Lara recognizes that the COVID-19 pandemic has  caused an unprecedented challenge for California’s businesses and residents. In
 
response to the COVID-19 pandemic, Governor Gavin Newsom on March 4, 2020
 
declared a statewide State of Emergency. Californians were ordered to “shelter-in-place”
 
shortly thereafter. 

Insurance Commissioner Ricardo Lara recognizes that the COVID-19 pandemic has  caused an unprecedented challenge for California’s businesses and residents. In  response to the COVID-19 pandemic, Governor Gavin Newsom on March 4, 2020  declared a statewide State of Emergency. Californians were ordered to “shelter-in-place”  shortly thereafter. 

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The COVID-19 pandemic has severely curtailed activities of policyholders in both  personal and commercial lines. As a result, projected loss exposures of many insurance
 
policies have become overstated or misclassified. This is especially true for policies
 
where premiums are based partly on measures of risk such as number of miles driven,
 
revenue, and payrolls which have all dropped significantly because of COVID-19. 

The COVID-19 pandemic has severely curtailed activities of policyholders in both  personal and commercial lines. As a result, projected loss exposures of many insurance  policies have become overstated or misclassified. This is especially true for policies  where premiums are based partly on measures of risk such as number of miles driven,  revenue, and payrolls which have all dropped significantly because of COVID-19. 

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According to UC Davis’ Special Report on Impact of COVID-19 on California Traffic  Accidents, reduced driving has resulted in fewer accidents, injuries, and fatalities on
 
public highways and roads. In addition, the Consumer Federation of California Education
 
Foundation (CFC) on March 23, 2020, submitted to the Insurance Commissioner a
 
Petition for Hearing to redress excessive automobile insurance rates and premiums
 
caused by the COVID-19 pandemic. Commissioner Lara agrees that the overall risk of
 
loss for private passenger automobile insurance is lower due to the pandemic, however,
 
the Commissioner also recognizes that these reductions in risk extend beyond the
 
automobile line of insurance referenced in the Petition. Accordingly, this Bulletin requires
 
broader premium reductions for other lines of insurance in addition to reductions for the
 
private passenger automobile insurance line. 

According to UC Davis’ Special Report on Impact of COVID-19 on California Traffic  Accidents, reduced driving has resulted in fewer accidents, injuries, and fatalities on  public highways and roads. In addition, the Consumer Federation of California Education  Foundation (CFC) on March 23, 2020, submitted to the Insurance Commissioner a  Petition for Hearing to redress excessive automobile insurance rates and premiums  caused by the COVID-19 pandemic. Commissioner Lara agrees that the overall risk of  loss for private passenger automobile insurance is lower due to the pandemic, however,  the Commissioner also recognizes that these reductions in risk extend beyond the  automobile line of insurance referenced in the Petition. Accordingly, this Bulletin requires  broader premium reductions for other lines of insurance in addition to reductions for the  private passenger automobile insurance line. 

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To protect consumers and to provide consistent direction to the insurance industry  regarding misclassifications of risk resulting from the COVID-19 pandemic and to address certain issues raised in CFC’s petition, Commissioner Lara hereby orders insurers to
 
make an initial premium refund for the months of March and April to all adversely impacted
 
California policyholders in the following lines of insurance, as quickly as practicable, but
 
in any event no later than 120 days after the date of this Bulletin: 

To protect consumers and to provide consistent direction to the insurance industry  regarding misclassifications of risk resulting from the COVID-19 pandemic and to address certain issues raised in CFC’s petition, Commissioner Lara hereby orders insurers to  make an initial premium refund for the months of March and April to all adversely impacted  California policyholders in the following lines of insurance, as quickly as practicable, but  in any event no later than 120 days after the date of this Bulletin: 

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  • Private passenger automobile insurance

  • Commercial automobile insurance

  • Workers’ compensation insurance

  • Commercial multiple peril insurance

  • Commercial liability insurance

  • Medical malpractice insurance

  • Any other line of coverage where the measures of risk have become substantially  overstated as a result of the pandemic. 

  • Private passenger automobile insurance

  • Commercial automobile insurance

  • Workers’ compensation insurance

  • Commercial multiple peril insurance

  • Commercial liability insurance

  • Medical malpractice insurance

  • Any other line of coverage where the measures of risk have become substantially  overstated as a result of the pandemic. 

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If the COVID-19 pandemic continues beyond May, Commissioner Lara will send out a  subsequent Bulletin to insurers and provide appropriate instructions.  

If the COVID-19 pandemic continues beyond May, Commissioner Lara will send out a  subsequent Bulletin to insurers and provide appropriate instructions.  

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Commissioner Lara grants each insurer reasonable flexibility in determining how best to  quickly and fairly accomplish the refund of premium to policyholders. Insurers may
 
comply with the premium refund order by providing a premium credit, reduction, return of
 
premium, or other appropriate premium adjustment. 

Commissioner Lara grants each insurer reasonable flexibility in determining how best to  quickly and fairly accomplish the refund of premium to policyholders. Insurers may  comply with the premium refund order by providing a premium credit, reduction, return of  premium, or other appropriate premium adjustment. 

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In responding to this Order, insurers may take the following actions without obtaining prior  approval of rates or rules by the Department of Insurance if done consistent with the
 
insurer’s existing rating plan:

In responding to this Order, insurers may take the following actions without obtaining prior  approval of rates or rules by the Department of Insurance if done consistent with the  insurer’s existing rating plan:

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  • Reclassification of exposures to comport with current exposure, or

  • Reduction of the exposure base (miles driven, payroll, receipts, etc.) to reflect  actual or anticipated exposure.

  • Reclassification of exposures to comport with current exposure, or

  • Reduction of the exposure base (miles driven, payroll, receipts, etc.) to reflect  actual or anticipated exposure.

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Insurers may refund premium without prior approval by the Department of Insurance if  they apply a uniform premium reduction for all policyholders in an individual line of
 
insurance, for recent, current, and upcoming policy periods or any portion thereof. The
 
amount of the across-the-board premium refund may be an average percentage based
 
on estimated change in risk and/or reduction of exposure bases. Considerations relevant
 
to determining the amount of an appropriate premium refund or credit, if any, may include
 
distribution of policyholders across mileage bands or type of use of vehicle (such as
 
pleasure use vs. commute use) for personal automobile insurance or, at a minimum,
 
premium for a commercial policy. 

Insurers may refund premium without prior approval by the Department of Insurance if  they apply a uniform premium reduction for all policyholders in an individual line of  insurance, for recent, current, and upcoming policy periods or any portion thereof. The  amount of the across-the-board premium refund may be an average percentage based  on estimated change in risk and/or reduction of exposure bases. Considerations relevant  to determining the amount of an appropriate premium refund or credit, if any, may include  distribution of policyholders across mileage bands or type of use of vehicle (such as  pleasure use vs. commute use) for personal automobile insurance or, at a minimum,  premium for a commercial policy. 

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Alternatively, insurers may refund premium without prior approval by the Department of  Insurance by reassessing the classification and exposure bases of affected risks on a
 
case-by-case basis for recent, current, and upcoming policy periods or any portion
 
thereof. Where there are risk misclassifications resulting in premium overcharges,
 
insurers should immediately reclassify risks and refund premium. An example would be
 
to reclassify a personal automobile exposure from “commute use” to “pleasure use” and to reduce the insured’s estimated miles driven for as long as the COVID-19 pandemic
 
continues to substantially reduce the number of miles driven. 

Alternatively, insurers may refund premium without prior approval by the Department of  Insurance by reassessing the classification and exposure bases of affected risks on a  case-by-case basis for recent, current, and upcoming policy periods or any portion  thereof. Where there are risk misclassifications resulting in premium overcharges,  insurers should immediately reclassify risks and refund premium. An example would be  to reclassify a personal automobile exposure from “commute use” to “pleasure use” and to reduce the insured’s estimated miles driven for as long as the COVID-19 pandemic  continues to substantially reduce the number of miles driven. 

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Whether choosing one of the above-described approaches, or an alternative approach,  insurers shall, no later than 120 days after the date of this Bulletin, provide each affected
 
policyholder, if applicable, with a notification of the amount of the refund, a check,
 
premium credit, reduction, return of premium, or other appropriate premium adjustment.
 
In addition, insurers shall provide an explanation of the basis for the adjustment, including
 
a description of the policy period that was the basis of the premium refund and any
 
changes to the classification or exposure basis of the affected policyholder. The insurer
 
shall further offer each insured the opportunity to provide their individual actual or
 
estimated experience. For automobile policies, this includes an invitation to provide
 
updated mileage estimates as appropriate. 

Whether choosing one of the above-described approaches, or an alternative approach,  insurers shall, no later than 120 days after the date of this Bulletin, provide each affected  policyholder, if applicable, with a notification of the amount of the refund, a check,  premium credit, reduction, return of premium, or other appropriate premium adjustment.  In addition, insurers shall provide an explanation of the basis for the adjustment, including  a description of the policy period that was the basis of the premium refund and any  changes to the classification or exposure basis of the affected policyholder. The insurer  shall further offer each insured the opportunity to provide their individual actual or  estimated experience. For automobile policies, this includes an invitation to provide  updated mileage estimates as appropriate. 

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Commissioner Lara further hereby orders every insurer writing any of the above referenced lines of insurance in California to report to the Department of Insurance within  60 days of the date of this Bulletin, all actions taken and contemplated future actions to
 
refund premium in response to or consistent with this Bulletin. The report shall include
 
California-specific information and an explanation and justification for the amount and
 
duration of any premium refund, and how those measures reflect the actual or expected
 
reduction of exposure to loss.

Commissioner Lara further hereby orders every insurer writing any of the above referenced lines of insurance in California to report to the Department of Insurance within  60 days of the date of this Bulletin, all actions taken and contemplated future actions to  refund premium in response to or consistent with this Bulletin. The report shall include  California-specific information and an explanation and justification for the amount and  duration of any premium refund, and how those measures reflect the actual or expected  reduction of exposure to loss.

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The report shall also provide monthly and overall totals for the following:

The report shall also provide monthly and overall totals for the following:

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  • Percentage of refund applied,

  • Aggregate premium prior to, and subject to, application of refund,

  • Aggregate premium refund,

  • Average premium before and after refund,

  • Average percentage of refund, applied to each policyholder,

  • Number of in-force policies, and

  • Number of policyholders receiving refund.

  • Percentage of refund applied,

  • Aggregate premium prior to, and subject to, application of refund,

  • Aggregate premium refund,

  • Average premium before and after refund,

  • Average percentage of refund, applied to each policyholder,

  • Number of in-force policies, and

  • Number of policyholders receiving refund.

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Reports shall be submitted to the Rate Specialist Bureau at the following email address:  RSBCovid19PR@insurance.ca.gov. Reports may be made available to the public.

Reports shall be submitted to the Rate Specialist Bureau at the following email address:  RSBCovid19PR@insurance.ca.gov. Reports may be made available to the public.

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CA LICENSE # 0E89987               

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EXCELSURE INSURANCE SERVICES
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EXCELSURE INSURANCE SERVICES

18377 Beach Boulevard,

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Suite 325,

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Huntington Beach, CA 92648

Huntington Beach, CA 92648

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Phone. 800-987-5051

Phone. 800-987-5051

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