California insurance commissioner orders insurance companies to refund drivers, businesses affected by the COVID-19 emergency

California's insurance commissioner has ordered some insurance companies to refund premiums for March and April because of restrictions brought on by coronavirus shelter in place orders and said the action would provide consumers and businesses "much-needed financial relief" during this crisis.

Monday's order from Commissioner Ricardo Lara includes premiums customers have paid for coverage including workers' compensation, medical malpractice, commercial liability and private and commercial auto policies.

Insurance companies set rates based on risk. But risk has changed because of the coronavirus. Businesses have been forced to shut down, which has dramatically reduced risk liability in the workplace. 

FILE - Chairs are wrapped in caution tape at a restuarant in Dublin, California following shelter in place orders in the San Francisco Bay Area during an outbreak of the COVID-19 coronavirus, March 16, 2020.

“With Californians driving fewer miles and many businesses closed due to the COVID-19 emergency, consumers need relief from premiums that no longer reflect their present-day risk of accident or loss,” said Commissioner Lara. “Today's mandatory action will put money back in people’s pockets when they need it most.”

The commissioner's office cited a report from UC Davis that found reduced driving due to the shelter in place order has resulted in fewer accidents on California roads.

(Getty Images)

Some auto insurance companies have recently announced they would voluntarily refund premium to drivers, according to the insurance commissioner. The latest order now extends the action to include more companies, while adding commercial lines. It also allows the commissioner's office to monitoring insurance companies’ compliance with California’s consumer protection laws so that refunds are not discriminatory or inadequate, Lara said. 

“I applaud efforts made by insurance companies to date that have offered grace periods and flexibility to consumers and businesses during this national emergency,” the commissioner said, adding, “We must do more to help our hard-working families and small businesses.”

Under the commissioner's directive, insurance companies are required to provide customers appropriate premium adjustments as soon as possible and no later than August. 

The order could be extended if closures continue. A representative from the American Property Casualty Insurance Association has not yet responded to this latest action from the commissioner's office. 

The state Department of Insurance has taken other measures intended to assist California consumers during the COVID-19 emergency including requesting at least a 60-day grace period for policyholders to pay their premiums, extending deadlines for insurance claims, allowing those with an expired license and/or vehicle registration to maintain auto insurance, and eliminating cost-sharing for COVID-19 testing and screening.

The Associated Press contributed to this story.