In the rush to protect businesses and consumers from financial disaster, state governors around the nation are enacting a variety of rules and requirements to help provide relief to people struggling with the economic impact of COVID-19. In some states, evictions and foreclosures have been ordered stopped. Others have enacted all sorts of moratoriums on fines and fees as well as waived other requirements to ease the burden on affected people. But, aside from the financial sector no business sector has been singled out more in these special pronouncements than the insurance industry. 

Auto insurers have been ordered to insure risks they originally did not anticipate. Health insurers have been pushed to waive co-pays and deductibles for COVID related benefits. Workers’ comp insurers are starting to see ordered coverage for COVID related illness and absence that would not exist under normal statute. And this week, in California, insurers across multiple lines were ordered to refund premiums for the months of March and April, and “possibly beyond.” California Insurance Commissioner Ricardo Lara said in a statement it was intended to provide “much needed relief” to businesses and consumers.

We should remind the commissioner, along with all these governors, that insurance companies are businesses, too. 

According to an article by Nancy Grover published on this site yesterday, the statement issued read in part:

“Commissioner Lara hereby orders insurers to make an initial premium refund for the months of March and April to all adversely impacted California policyholders in the following lines of insurance, as quickly as practicable, but in any event no later than 120 days after the date of this Bulletin,” the order said:

    • Private passenger automobile insurance
    • Commercial automobile insurance
    • Workers’ compensation insurance
    • Commercial multiple peril insurance
    • Commercial liability insurance
    • Medical malpractice insurance

Also, “any other line of coverage where the measures of risk have become substantially overstated as a result of the pandemic,” are included.

So, who determines which policyholders were adversely affected? And to what degree? In the long haul it might be easy to identify for a payroll-based program like workers’ comp. But at a time of crisis where the same companies are being ordered to cover risk they did not assess premium for, it seems an idea that is ill advised. There is something perverse about the concept of refunding premiums at a time of heightened exposure. 

For some lines of coverage, we can acknowledge reduced risk from the stay-at-home orders in place in California and elsewhere. There is certainly less overall automobile exposure at this time. But do we really think medical malpractice risks will be reduced during the time of a pandemic?  

In Illinois, workers’ comp insurers are facing mandated coverage in the form of “rebuttable presumptions” for First Responders and others classified as “front line” workers. Front line workers are defined in Illinois Section 9030.70 Rules of Evidence [Emergency Amendment] as:

Stores that sell groceries and medicine, Food, beverage, and cannabis production and agriculture, Organizations that provide charitable and social services, Gas stations and businesses needed for transportation, Financial institutions, Hardware and supplies stores, Critical trades, Mail, post, shipping, logistics, delivery, and pick-up services, Educational institutions, Laundry services, Restaurants for consumption off-premises, Supplies to work from home, Supplies for Essential Businesses and Operations, Transportation, Home-based care and services, Residential facilities and shelters, Professional services, Day care centers for employees exempted by [Executive Order 2020-10], Manufacture, distribution, and supply chain for critical products and industries, Critical labor union functions, Hotels and motels, and Funeral services.

The insurers for all those entities must accept work-related COVID claims, unless they can prove that the employee was infected elsewhere.

Good luck with that. Other states are eyeing Illinois’ action, and may very well try to replicate it. We should hope that, at this time of unprecedented exposure, that a premium refund idea like that in California doesn’t catch on elsewhere. Everyone understands that these are extraordinary times, and that both consumers and businesses need extra help to survive.

I just hope that the people making up the rules remember that insurance companies are businesses, too, and the country will still need a healthy and well-funded insurance sector when the COVID threat has passed. 

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