Major Auto Insurers Face Deadline to Refund Customers Who Drove Less During Pandemic

If you’ve been driving during the pandemic, some money could be coming your way.

California’s department of insurance said three major insurance companies in the state have been overcharging customers for auto insurance during the COVID-19 crisis. The companies have a month to explain why, start cutting checks or face potential legal action.

The three insurers share a huge part of the California auto insurance market, according to the state insurance commissioner, who said they have charged what he calls pre-pandemic rates to people whose driving habits have declined significantly.

Californians were told to stay home during the early stages of the pandemic to help save lives and prevent the spread of the coronavirus. Insurance commissioner Ricardo Lara ordered all insurers to refund and lower auto premiums.

That result was $2.4 billion in savings for drivers. 

“In that same order, I ordered them to give us data, and now that we are processing the data, we’ve found out that many insurance companies have not done enough,” Lara said. 

Allstate, Mercury and CSAA Insurance are the worst offenders in terms of refunding drivers for auto premiums. The three companies combined provide auto insurance to 20 percent of California’s drivers, but in studying refunds given to drivers between March and September of 2020, Lara said there’s a huge discrepancy between what was refunded and what’s actually owed.  

Insurance company groups returned the average of 9 percent of auto premiums, but they should have really returned twice that amount, Lara said. The gap for the three worst offender is larger than the average refund, he added. 

“An appropriate refund is going to be one that matches the reduced risk of loss as seen by the insurance industry data,” Lara said. 

Lara said the clock is ticking and his legal team is on standby if his deadline isn’t met.

“They’ve got 30 days to tell me how they are going to give money back to consumers as quickly as possible before we take action,” Lara said. “I’m starting with these three to send the message that I’m not going to accept this from any other insurance agency as well.”

The I-Team contacted all three insurers. Their statements are below. 

Allstate

“We were the first insurer to respond to decreased driving during the pandemic by returning $1 billion to drivers countrywide and always provide our customers affordable coverage. Not only did we lead to support drivers, but we’ve been there for Californians throughout the wildfires by paying thousands of insurance claims and extended our coverage offerings this year to help alleviate the homeowners’ insurance availability crisis.”

CSAA

“We are in receipt of Commissioner Lara’s letter, are currently reviewing the request, and will respond within the time frame requested. In 2020, CSAA Insurance Group issued more than $137 million in total refunds to policyholders as part of our commitment to help AAA Members prevent, prepare for and recover from life’s uncertainties.”

Mercury

“To date, Mercury has returned more than $175 million in premium to our California customers and continues to provide ongoing premium relief to hundreds of thousands of customers who are driving less as a result of the pandemic. In addition, Mercury customized billing plans for thousands of policyholders who suffered financial hardship as a result of the pandemic so they could remain insured and protected. Going forward, Mercury will continue to do the right thing for its customers, including offering some of the lowest rates in the state while continuing to provide award-winning service.”

Lara contends there may be other insurers that owe more money and could face similar deadlines or legal challenges.