On Monday, April 13, California Insurance Commissioner Ricardo Lara issued a Bulletin to all property and casualty insurers and workers’ compensation insurers ordering them to return premiums to California policyholders adversely impacted by COVID-19.
Initial Premium Refund
Noting that projected loss exposures of many insurance policies have become overstated or misclassified due to the pandemic and the “shelter-in-place” order issued by Governor Gavin Newsom on March 4, Commissioner Lara ordered certain insurers to make an initial premium refund, reflecting the change in risk and/or reduction of exposure bases, for the months of March and April in the following lines of insurance:
- Private passenger automobile
- Commercial automobile
- Workers’ compensation
- Commercial multi-peril
- Commercial liability
- Medical malpractice
- Any other line of coverage where the measures of risk have become substantially overstated as a result of the COVID-19 pandemic
A subsequent Bulletin will be issued to provide instructions if the pandemic (and the shelter-in-place order) continues beyond May.
Premium refunds to affected policyholders must be made as quickly as practicable, but no later than 120 days from the date of the Bulletin, and must include an explanation of the basis for the adjustment.
Commissioner Lara also ordered insurers to report to the California Department of Insurance, within 60 days of the date of the Bulletin, all actions and contemplated future actions to refund premiums. The report must include California-specific information, 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.
Rate Filing Exemption
Insurers are exempt from the rate filing requirement in connection with premium refunds if the following actions are taken consistent with the insurer’s existing rating plan:
- Application of a uniform premium reduction for all policyholders in an individual line of insurance; or
- Reassessment of the classification and exposure bases of affected risks on a case-by-case basis.