California’s insurance commissioner on Thursday ordered nearly 50 auto insurers to provide detailed information about their claim costs during the pandemic, his latest attempt to compensate consumers he says were overcharged as traffic virtually disappeared when the nation’s largest insurance market imposed the first U.S. coronavirus stay-home order.
Commissioner Ricardo Lara gave California's major insurers 30 days to respond.
"With this letter, every insurance company is on notice to give us data so we can tell them what they owe consumers," said Deputy Insurance Commissioner Michael Soller.
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 already gave back $2.4 billion in excess pandemic profits but say they are now losing money as traffic has rebounded to pre-pandemic levels, with inflation and supply chain shortages compounding the cost of increased claims due to worsening driving habits.
“We are concerned about the effect that CDI’s inaction is having on the auto insurance market and California drivers," said Denni Ritter, vice president for state government relations for the American Property Casualty Insurance Association.
She said insurers “are heartened to see the department make some moves towards at least reviewing these filings” and will provide data she said will “demonstrate the extreme cost drivers that CDI has been ignoring.”
Several major companies have said they are cutting back their California marketing or operations, with the CEOs of Progressive and Kemper last month tying their decisions to Lara's failure to consider rate increases.
The dispute comes as Lara runs for reelection against Republican Robert Howell, who is not expected to pose a serious threat.
The companies say Lara can’t force the additional refunds he says are still owed consumers, because of a 2021 appellate court decision that he says they are interpreting too broadly. Lara’s demand letter is his latest effort to try to incorporate insurers’ earlier profits into their current rate increase requests.
His letter went to 47 companies doing business in California, addressing 54 rate increase applications including 38 that have been stalled for months.
Insurers' claims costs “became overstated as a result of policyholders driving significantly less,” the letter says. “On behalf of California consumers, the Department of Insurance seeks premium refunds in the full amount of what policyholders are owed.”
The detailed cost information will be considered in the department's review of any pending or future rate increase requests, says the three-page letter. It has a separate “refund information workbook” — a spreadsheet with five subcategories for companies to expand on requested details in at least six different areas.
