As States Pause Reopening Efforts and Accident Levels Are Low, Insurance Companies Are Sitting On a Coronavirus Windfall
Washington, D.C. – The Consumer Federation of America (CFA) urged newly appointed Arizona Insurance Commissioner Evan Daniels to require auto insurance companies to give premium refunds to consumers throughout the summer, due to recent re-closures of businesses and the growing impact of the COVID-19 pandemic.
“The conditions that led to auto insurance companies providing voluntary refunds and credits in the spring persist and will continue for the foreseeable future,” wrote CFA in a letter sent today. “Most insurers have not taken it upon themselves to return the windfall they are receiving as Arizonans deal with the extended emergency that will keep cars off the road and accidents down. As such, we urge you to mandate auto insurance premium refunds throughout the summer.”
Governor Ducey’s recent order pausing re-opening and requiring closure of many businesses is in effect until further notice. As was the case during the spring, driving declines in Arizona due to these shutdowns mean fewer accidents and fewer insurance claims. In order to prevent these public health-driven restrictions from becoming a Coronavirus Windfall for insurers, it is incumbent upon the Arizona Department of Insurance and Financial Institutions to order refunds to policyholders. Last month, California Insurance Commissioner Ricardo Lara issued an order extending mandatory refunds into the summer, which CFA has called a model for other state insurance departments.
On March 18, 2020, CFA sent a letter to all Insurance Commissioners urging them to direct auto insurers to provide premium payments to consumers affected by COVID-19. In a separate report, CFA determined that insurer refunds during the spring should have been 30% of premiums to account for the unprecedented decline in claims as a result of reduced driving during the pandemic, though most insurers only returned between 15% and 20%. In its letter to Commissioner Daniels, CFA provided suggestions about how to calculate the appropriate refunds in the near term and ensure that rates in the future reflect the new normal created by this pandemic
“Unfortunately, many insurance companies seem to think they did enough when they gave back a portion of the excess premium they collected this spring,” said CFA’s insurance expert Doug Heller. “But this pandemic persists in Arizona and much of the country. The same reasons that made refunds necessary in the spring continue into the summer, so drivers need Commissioner Daniels and his colleagues around the country to demand that insurers provide appropriate relief.”
The Consumer Federation of America is an association of more than 250 nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education.