The California stay-at-home order due to the COVID-19 pandemic began March 19, 2020. As the order slowly modifies and lifts in phases, there is no doubt that some things have changed. You likely haven’t been out driving – other than essential short trips – for quite a while. Over the past two months, very few people have put a lot of mileage on their cars.
Which begs the question, why are we paying full premiums on our auto insurance when we are not even using our cars?
With fewer people traveling in cars, approximately 35% fewer nationwide and 42% fewer in California, there are fewer accidents on the roads. This results in fewer car accident insurance claims, resulting in fewer accident payouts – and leading to big profits for your car insurance company. In fact, the top 10 biggest insurance companies collect around $178 billion in premiums each year.
The drastic reduction in vehicles on our roads, which was as high as 50% just a few weeks ago, has provided these companies with a huge financial boost, while many of our citizens remain furloughed and unemployed. In April, a number of auto insurance companies announced, with great fanfare, they would return payments to their customers over the coming weeks.
All in all, these refunds total approximately $10.5 billion and appear to come to policyholders in the form of 25% to 30% discounts on one to six months of premiums, depending on the insurer. Some insurers are also allowing policyholders to defer payments – but not skip them. For consumers and watchdog groups who were expecting much more, this is a major disappointment. As a result, some policyholders and legislators are wondering if these discounts were really enough.
California Insurance Commissioner Ricardo Lara took steps to ensure state insurance companies do their part to treat their policyholders with good faith. In fact, he mandated it, ordering some insurance companies to refund premiums for policies based on risk, stating, “Consumers need relief from premiums that no longer reflect their present-day risk of accident or loss. Today’s mandatory action will put money back in people’s pockets when they need it most.”
Lara’s order, issued April 13, gives insurance companies 120 days to comply.
We recommend that if you are having trouble paying your auto insurance premium due to financial issues from the pandemic, do not ignore it. Allowing your insurance to lapse can be more costly in the end, as it can result in a fine or having your insurance cancelled. During this uncertain time, your insurance company should be willing to work with you, so do not be afraid to call your representative and ask for assistance.
If you need further help or advocacy, the Los Angeles attorneys at McNicholas & McNicholas, LLP can help. Contact us today to set up a consultation and find out how we can assist you. Call us at 310-474-1582 or complete our contact form.