Consumer Watchdog, insurance companies doing business in California held onto about $5.5 billion more in 2020 than they did the previous year, thanks to the significant drop in claims.
This would be shrugged off as just another consequence of the pandemic except for a
California lawthat caps the profitability of insurance companies in the state. The average net worth of insurance companies was twice the amount allowed.
How does the California insurance law work?
Proposition 103, a law dating back to 1988, requires insurance companies to get prior approval before setting their rates. If their rates exceed the approved amount, they must refund the overcharges.
California State Insurance Commissioner Ricardo Lara began issuing bulletins already in April 2020, requiring insurance companies to refund consumers.
But Consumer Watchdog’s study shows that because the insurers were allowed to calculate what they owe themselves, the top 15 providers have only paid back $1.9 billion, less than half of what they owe.
State Farm, for example, reported a loss ratio that was 22.1% lower in 2020 compared to 2019, causing an overcharged of about $1.2 billion in 2020. But Consumer Watchdog says the company has only returned $613.4 million to consumers.
Were other states also overcharged?
California isn’t the only state regulating insurance companies. Other states are running into similar problems with getting providers to comply with the rules.
Nevada, 10 of the country’s largest insurance companies were named in a class-action lawsuit claiming they overcharged consumers living in the state during the pandemic. Like California, Nevada law prohibits insurers from charging excessive rates.
How to save money on car insurance
You might not be able to do much to get your car insurance overcharges refunded, but there are plenty of other ways to lower the cost of your coverage.
Improving your credit score and the amount you drive can affect your rates, but changing these things might require significant adjustments to your lifestyle. The best thing to focus on for quick savings is how you buy your insurance.
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