On April 13, 2020, California Insurance Commissioner Ricardo Lara ordered insurance companies to refund a portion of premiums to both consumers and businesses in order to provide relief during the COVID-19 pandemic. This order pertains to premiums paid for in March and April; however, May will be included as well if the “shelter in place” restrictions continue. The premise of the refunds is based on the fact that there is less risk of loss during the pandemic to lines of insurance such as private passenger automobile, commercial automobile, worker’s compensation, commercial multi-peril, commercial liability, and medical malpractice. “Today’s mandatory action will put money back in people’s pockets where they need it most,” stated Commissioner Lara.
While insurers have some leeway in deciding how to quickly and fairly deliver the refunds, they are required to provide a premium credit, reduction, return of premium, or other similar adjustments no later than August 2020. Additionally, Commissioner Lara is supporting policyholders by asking for a 60-day grace period on paying premiums during this time. This will help to curtail any insurance cancellation for policyholders.
A UC Davis special study reported that there have been less accidents, injuries, and fatalities due to lighter traffic on the roads. Additionally, it stated that liabilities for businesses have dropped due to declining payrolls and receipts coming from shutdown orders.
Insurance companies are required to report back on all premium refunds they have issued or expect to issue within 60 days to the Department of Insurance.
This action is part of an ongoing effort by the Department of Insurance to provide financial aid to consumers during this pandemic.
For more information or assistance with your particular tax situation, please contact our tax professionals at email@example.com or toll free at 844.4WINDES (844.494.6337).