California asks auto insurers to disclose pandemic profits

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California’s insurance commissioner on Thursday ordered nearly 50 auto insurers to provide detailed information on their claims costs during the pandemic, his latest attempt to compensate consumers he says has been overcharged as traffic has all but disappeared when the nation’s largest insurance market imposed America’s first coronavirus stay-at-home order.

Commissioner Ricardo Lara has given major California insurers 30 days to respond.

“With this letter, each insurance company is being notified to provide us with data so that we can tell them what they owe consumers,” Deputy Insurance Commissioner Michael Soller said.

It’s the latest salvo in a dispute over whether Lara’s refusal to approve more than three dozen rate hike requests over the past 29 months threatens insurance companies’ ability to write policies in California. Insurers have already returned $2.4 billion in pandemic excess profits, but say they are now losing money as traffic has rebounded to pre-pandemic levels, inflation and shortages the supply chain compounding the cost of increased claims due to deteriorating driving habits.

“We are concerned about the effect CDI’s inaction is having on the auto insurance market and California drivers,” said Denni Ritter, vice president of state government relations for the American Property Casualty Insurance Association.

She said insurers “are encouraged to see the department take steps to at least review these deposits” and will provide data that she says will “demonstrate the extreme cost drivers that CDI has ignored.”

Several major companies have said they are cutting marketing or operations in California, with the CEOs of Progressive and Kemper last month linking their decisions to Lara’s inability to consider rate increases.

The dispute comes as Lara is running for re-election against Republican Robert Howell, who is unlikely to pose a serious threat.

The companies say Lara cannot force additional refunds that he says are still owed to consumers, due to a 2021 appeals court ruling that he says they are interpreting too broadly. Lara’s formal notice is her latest effort to try to incorporate the insurers’ past profits into their current rate hike demands.

His letter was sent to 47 companies doing business in California, addressing 54 rate increase requests, 38 of which have been stalled for months.

Insurers’ claims costs “became overstated due to policyholders driving significantly less,” the letter said. “On behalf of California consumers, the Department of Insurance is seeking reimbursement of premiums for the full amount of what policyholders are owed.”

The detailed cost information will be considered during the department’s review of any pending or future rate increase requests, the three-page letter states. It has a separate “refund information workbook” – a spreadsheet with five sub-categories allowing businesses to expand on the requested details in at least six different areas.

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