California insurance regulators say auto insurers should have given more refunds to drivers last year because of the drop in traffic and fewer accidents during the outbreak. California was the first state in the nation to enact a Home-avoidance order to slow the spread of the New Coronavirus (CCA virus), and traffic plummeted in large numbers as a result.
A Davis University study found that after the first week of Governor Newsom’s home-avoidance order, crashes dropped 55 percent and traffic injuries and fatalities dropped 53 percent. Schools and most nonessential businesses closed for months, millions of employees lost their jobs or worked from home, and once-congested freeways flowed freely, even in crowded Los Angeles and San Francisco.
California Insurance Commissioner Ricardo Lara said millions of people stayed home and drove less, making the roads safer. He argued that insurers should calculate a new round of refunds to motorists. After California’s reboot, commuter traffic flow began to rebound slightly, and insurers continued to charge drivers high fees.
Rolla noted that the top 10 insurers, which account for 80 percent of the auto insurance market, saw a nearly 42 percent drop in the number of injury claims and more than 40 percent reduction in property damage claims during the March-September period last year compared to 2019. Insurers refunded about $1.75 billion to consumers, but the refunds were far from adequate due to lower costs to insurers. With an average refund of 9 percent of consumers’ insurance bills last April, Lora believes the refund rate should be 17 percent, or about $220 million or more. Including Allstate, Farmers, USAA, State Farm and CSAA Insurance Group, all ranked among the top 10 private insurers.
State Farm Insurance said it will refund an additional $400 million to 3.5 million California auto insurers because of better-than-expected claims results in the second half of last year. Consumers will receive refunds of about 18 percent of their premiums, or an average of $100 per policy, as early as May. The American Property Casualty Insurance Association, which represents the insurance industry, said all insurers reduced premiums last year when driving was reduced and continue to adjust policies according to the needs of individual driving patterns, and will cooperate with Lola’s latest insurance law.
However, insurers also pointed out that despite the reduction in traffic, the dangerous driving situation is worse. According to the National Highway Traffic Safety Administration, traffic fatalities increased by nearly 5 percent in the first nine months of 2020, despite a decrease in traffic volume. The fatal crashes were attributed to high-risk driving behaviors, such as speeding, driving under the influence and not wearing seat belts. The association’s vice president, Mark Sektnan, said reckless driving could become more deadly as traffic begins to gradually return to pre-Epidemic levels. The trend toward dangerous driving, coupled with increased litigation, medical and auto repair expenses, will also affect premium prices.
Rolla ordered each insurer to report by April 30 on how the company will refund consumers. He noted that every insurer refunded 10-22 percent of premiums between March and May of last year, but only four insurers refunded a portion of premiums to California auto insurers in December, the most restrictive period in the state.
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