News: 2020 Press Release
For Release: April 13, 2020
Media Calls Only: 916-492-3566
Email Inquiries: cdipress@insurance.ca.gov
Commissioner Lara Orders Insurance Companies to Refund Premiums to Drivers and Businesses Affected by the COVID-19 Emergency
Commissioner’s action reflects reduced risk of loss due to “shelter in place” restrictions
LOS ANGELES, Calif. — Insurance Commissioner Ricardo Lara ordered insurance companies to return insurance premiums to consumers and businesses and provide much-needed financial relief during the COVID-19 emergency. The Commissioner's Bulletin covers premiums paid for at least the months of March and April — including the month of May if “shelter in place” restrictions continue — in at least six different insurance lines: private passenger automobile, commercial automobile, workers' compensation, commercial multi-peril, commercial liability, medical malpractice, and any other insurance line where the risk of loss has fallen substantially as a result of the COVID-19 pandemic.
“With Californians driving fewer miles and many businesses closed due to the COVID-19 emergency, consumers need relief from premiums that no longer reflect their present-day risk of accident or loss,” said Commissioner Lara. “Today's mandatory action will put money back in people’s pockets when they need it most.”
The Commissioner's Bulletin requires insurance companies to provide a premium credit, reduction, return of premium, or other appropriate premium adjustment as soon as possible, and no later than August 2020. Commissioner Lara has already requested at least a 60-day grace period for policyholders to pay their premiums so that insurance policies are not cancelled for nonpayment of premium during this challenging time. Together, these two actions will give consumers and businesses substantial financial relief.
According to a UC Davis Special Report on the Impact of COVID-19 on California Traffic Accidents, reduced driving has resulted in fewer accidents, injuries, and fatalities on public highways and roads. Falling payroll and receipts due to closure orders have also dramatically reduced risk of a liability loss for businesses.
Several auto insurance companies have recently announced voluntary premium refunds to drivers. Today's Bulletin extends these private personal auto policy reductions to more companies and adds commercial lines while monitoring insurance companies’ compliance with California’s consumer protection laws so that refunds are not discriminatory or inadequate.
A premium refund will not require prior approval by the Department of Insurance if an insurance company follows certain methods outlined in the Commissioner’s Bulletin, such as using an average percentage based on estimated change in risk or exposure. Consumers will also have the opportunity to provide their individual actual or estimated experience to their insurance company.
Commissioner Lara also ordered insurance companies to report back to the Department of Insurance all premium refunds they have issued or expect to issue within 60 days, in order to provide oversight and ensure companies are complying with the Bulletin.
“I applaud efforts made by insurance companies to date that have offered grace periods and flexibility to consumers and businesses during this national emergency,” added Commissioner Lara. “We must do more to help our hard-working families and small businesses.”
Today's action builds on other steps the Department of Insurance has taken to assist consumers during the COVID-19 emergency:
- Requesting a 60-day grace period for consumers and businesses to pay insurance premiums
- Extending deadlines for insurance claims until 90 days after the statewide “state of emergency” or any other “state of emergency” has ended related to COVID-19
- Maintaining auto insurance for those with an expired license and/or car registration
- Extending personal auto coverage for delivery drivers for California’s essential businesses
- Eliminating cost-sharing for COVID-19 testing and screening
- Reminding insurance companies that workers' compensation insurance applies regardless of a worker’s immigration status
- Urging uninsured Californians to obtain insurance to protect their health
- Directing health insurance companies to provide increased telehealth access for consumers
- Directing health insurance companies to submit emergency plans on prescriptions and health access
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Media note:
Led by Insurance Commissioner Ricardo Lara, the California Department of Insurance is the consumer protection agency for the nation's largest insurance marketplace and safeguards all of the state’s consumers by fairly regulating the insurance industry. Under the Commissioner’s direction, the Department uses its authority to protect Californians from insurance rates that are excessive, inadequate, or unfairly discriminatory, oversee insurer solvency to pay claims, set standards for agents and broker licensing, perform market conduct reviews of insurance companies, resolve consumer complaints, and investigate and prosecute insurance fraud. Consumers are urged to call 1-800-927-4357 with any questions or contact us at www.insurance.ca.gov via webform or online chat. Non-media inquiries should be directed to the Consumer Hotline at 800-927-4357. Teletypewriter (TTY), please dial 800-482-4833.
FAQs
If you paid your premium in advance and cancel your policy before the end of the term, the insurance company might refund the remaining balance. Most auto insurers will prorate your refund based on the number of days your current policy was in effect.
How do I get a refund on my insurance premiums? ›
The law allows the policyholder to have 15 days as the free-look period from the date the policy document is received. During this duration, the policyholder is entitled to cancel the policy and get a refund.
What does insurance premium refund mean? ›
A premium refund is a clause in some insurance policies that grants the beneficiaries a refund to the total amount of premiums paid to date. Depending on the contract and type of insurance, it will grant a refund of the premiums you paid if you die before that term runs out or if you voluntarily end your coverage.
Why did I get a refund from my insurance company? ›
Your insurance company may issue a refund if your policy is canceled, and you've paid your premium in advance. Receiving an insurance refund will largely depend on why you're canceling the policy and how much of the premium you paid in advance.
What are the situations where premiums can be refunded? ›
An insurance refund occurs when the insurance company returns a portion of the premium paid by the policyholder under specific circ*mstances, such as policy cancellation, overpayment, or policy adjustments.
Can health insurance premiums be refunded? ›
If your insurance company doesn't meet its 80/20 targets for the year, you'll get back some of the premium that you paid. You may see the rebate in a number of ways: A rebate check in the mail. A lump-sum deposit into the same account that was used to pay the premium, if you paid by credit card or debit card.
How to calculate insurance premium refund? ›
Pro-rata calculation: To calculate a pro-rata refund, insurers divide the total premium by the number of days in the policy term, then multiply by the number of unused days. Example: If you paid $600 for a 12-month policy and cancel after six months, the calculation is $600 / 365 days * 183 unused days = $300 refund.
How to write a refund letter to an insurance company? ›
I am writing this letter to request you the refund of Rs. 50,000, which I had paid as an advance for the 2 BHK flat. I had paid the money with a confirmation that I shall shift to your house, but due to the extension of COVID-19 guidelines, my office has decided to extend the work from home policy for six more months.
Is an insurance premium refund considered income? ›
It's only taxable income if you were previously able to deduct it and get a tax benefit it on your tax return.
What are the disadvantages of return of premium? ›
Cons
- High cost. Return of premium life insurance can cost two or three times what a typical term life insurance policy would.
- Poor return. The money you put into the policy won't earn interest the way it would if you invested it.
- Limited availability. Few companies offer return of premium policies and riders.
There are several circ*mstances that could trigger a return premium, including the policyholder canceling the policy before its expiration date, the insurer canceling the policy, or changes in the policy that result in a lower premium.
Is return of premium worth it? ›
Return of premium life insurance is not usually worth the cost because you'll miss out on the opportunity for your money to grow. Even though you do get money back at the end of the term, it'll have less value than it would have if you invested it or even just put it in a high-yield savings account.
Do insurance companies refund? ›
If you want to cancel your policy after the cooling-off period you should check your insurance policy. Most insurers will give you a refund if you have not made any claims during the policy year but you will usually have to pay administration fees.
What is the primary reason for processing refunds to insurance carriers? ›
Most insurance providers will request a refund if there is an issue with an overpayment.
How to get insurance premium back? ›
The premiums are used to cover the cost of claims made by policyholders, and they are not refundable. However, instead of the concept of return of premiums, most of the health insurance policies these days offer a feature known as a bonus or no-claim bonus (NCB).
How many days does an insurer have to return unearned premiums to an insured? ›
If the policy is not auditable, the gross unearned premium shall be tendered within 80 business days after the insurer either receives notice of the event that generated the gross unearned premium, or receives notice from a premium finance company of a cancellation.
What is the return of unused premiums? ›
Return of premium (ROP) life insurance is term life insurance that refunds your premium payments if you outlive the term of your coverage. In exchange for this benefit, you'll pay more in premiums while the policy is in force.
What is a prorated refund of unused premium? ›
What Is Pro-Rata Cancellation? On the flip side, pro-rata cancellation operates on a more straightforward principle. When a policyholder cancels their insurance policy under a pro-rata system, the insurance company calculates their refund based on the exact portion of the unused coverage period.
Is an unearned premium not refunded to the policyholder when a policy is canceled? ›
Unearned premiums may be subject to return if a client ends coverage before the term covered by the premium is complete. An unearned premium may be returned when an insured item is declared a total loss and coverage is no longer required, or when the insurance provider cancels the coverage.
