California WC Insurers Ordered to Refund Excess Premium Related to COVID-19 Impact

This morning, Insurance Commissioner Lara ordered all California workers’ compensation insurers to refund “excess premium” for March and April to reflect the impact of the COVID-19 pandemic on business operations.  The order also applies to private & commercial auto insurance, commercial liability and multiple peril insurance, medical malpractice, and “any other line of coverage where the measures of risk have become substantially overstated as a result of the pandemic.”  The refunds, due w/in 120 days, may be in the form of a premium credit, reduction, return of premium, or other appropriate premium adjustment. 

To comply, insurers may reclassify exposures to reflect their policyholders’ current situation or reduce the policyholders’ exposure base to reflect the actual or anticipated exposure.  Insurers may adopt rate or rule changes without CDI’s prior approval so long as the changes are consistent with the insurer’s existing rating plan.  In order to provide oversight and ensure that insurers are complying with the order, the CDI also requires that insurers submit a report to the department within 60 days of today detailing the actions they have taken or plan to take to refund premium. The report to the CDI must be emailed to the Rate Specialist Bureau at: RSBCovid19PR@insurance.ca.gov and should include monthly and overall totals showing the following: 

• the percentage of refund applied
• the insurer’s aggregate premium prior to, and subject to, application of the refund
• the aggregate premium refund
• the avg premium before and after the refund
• the avg percentage refund applied to each policyholder
• the number of in-force policies
• the number of policyholders receiving a refund

 In addition, within 120 days of the April 13 date of the order, insurers must notify each affected policyholder of: 

• the amount of the refund
• a check, premium credit, reduction, return of premium, or other appropriate premium adjustment
• an explanation of the basis for the adjustment, including a description of the policy period used to determine the premium refund and any changes to the policyholder’s classification or exposure basis.

 Insurers also must offer each insured an opportunity to provide their individual actual or estimated experience. 

Further action is likely if the pandemic continues beyond May.  For a copy of the order, see CDI Bulletin 2020-03.