The Consumer Federation of America (CFA) and the Center for Economic Justice (CEJ) have estimated that auto insurance companies made a nearly $30 billion profit in 2020 because of the COVID-19 pandemic. Both say state insurance regulators have failed to protect consumers.
During the lockdown created by the pandemic from March to June of 2020, less vehicles were on the road, so fewer auto collisions occurred and auto insurance claims dropped. Data from the CFA and CEJ shows that insurers collected $42 billion in excess premiums and provided only $13 billion in “premium relief.”
Many insurers chose to increase payouts to senior management and stockholders, and did not refund the windfall to consumers. According to the CFA and CEJ, auto insurance companies short-changed consumers by more than $125 per vehicle.
“In virtually every state, auto insurance premiums – by law – cannot be excessive. The inability or unwillingness of almost all state insurance regulators to enforce the law and protect consumers raises serious questions,” says J. Robert Hunter, CFA’s director of insurance in a statement. “As we pointed out in letter after letter to insurance regulators throughout 2020, it was crystal clear that insurers’ premium relief was woefully inadequate.”
The CFA and CEJ allege that most state insurance commissioners failed to protect consumers from excessive auto insurance premiums during the global pandemic which required many consumers to work from home or stay home for health concerns.
“As a result of the sudden change in exposure covered by auto insurance, premiums became excessive virtually overnight in mid-March 2020. However, most regulators did not take – and have still not taken — action to require the necessary premium relief from auto insurers” the CFA and CEJ say in a statement.
Most large U.S. insurers provided refunds or credits in April 2020 and May 2020 “but very little of the excess premium was given back after last spring and our research showed that even this two-month payback to policyholders was only about half of what should have been refunded.”
According to the CFA and CEJ, the only states that required premium refunds in the spring of 2020 were California, Michigan, New Jersey and New Mexico. Only California continued to require insurance companies to provide refunds to consumers after the first few months of the pandemic. California’s Insurance Commissioner Ricardo Lara determined in March 2021 that consumers were still being overcharged for premiums, and ordered auto insurance companies to return additional premiums. In June 2021, Washington announced data that will likely lead to refunds for consumers, as well as New Mexico in July 2021.
The CFA and CEJ have issued a statement to the president, as well as top officials of the National Association of Insurance Commissioners (NAIC) encouraging them to act immediately and begin the process of providing more refunds to consumers.