SACRAMENTO, Calif., May 11, 2020 /PRNewswire/ -- The Consumer Federation of California Education Foundation (CFC Foundation) called on the Department of Insurance to order GEICO to refund at least $210 million that it is overcharging auto policyholders who are driving less and filing fewer accident claims because of COVID-19.
In a Petition filed today, CFC Foundation alleges GEICO is violating a Bulletin issued in April by Insurance Commissioner Ricardo Lara, which ordered automobile insurers to issue COVID-19 refunds and credits to policyholders for coverage during the months of March and April 2020.
In stark contrast to other major auto insurers who have announced credits, refunds or discounts to their policyholders, GEICO is denying its 15% Coronavirus "giveback credit" to current policyholders who don't renew their coverage between April 8 and October 7, 2020. Instead, GEICO is offering this credit to new customers who sign up for GEICO coverage.
"GEICO is violating the Commissioner's Bulletin and the industry norm of giving a break to customers who are driving less and who desperately need financial relief right now," stated Richard Holober, CFC Foundation Director.
GEICO is California's third largest auto insurer. In 2018 it collected $2.8 billion from 1.5 million policyholders. In April GEICO announced a COVID-19 "giveback credit" of 15% for a six month policy to anyone except current customers who don't renew their policy. This amounts to a $210 million rate cut to future policyholders in California. CFC Foundation alleges that $210 million represents the minimum amount of windfall profits that GEICO has calculated it is currently enjoying by overcharging California customers due to COVID-19 changes in driving behaviors.
GEICO is a subsidiary of Berkshire Hathaway. Its Chairman and CEO Warren Buffett told a reporter as early as March 13, 2020, "We have seen in the last two weeks, for example, fewer accidents reported… So we know when people are driving…. And in the last ten days, people just haven't been driving as much."
CFC Foundation alleges that in addition to violating the Commissioner's Bulletin, GEICO violates regulations requiring it to file a proposed rate change with the Department of Insurance and gain its approval prior to implementing that change. GEICO's unapproved rate change is designed to force customers to renew in order to get a refund owed to them now. Its unapproved rate change is also an anti-competitive scheme to lure away business from its competitors in violation of public policy.
"GEICO found a way to take advantage of a human tragedy to launch a new marketing scheme," Holober stated. "GEICO must change course and offer immediate relief to customers who are driving less, with no strings attached."
Since 2013, the non-profit CFC Foundation and its sponsor, the Consumer Federation of California, have intervened in 15 automobile and homeowners insurance cases, saving seven million consumers over $300 million dollars in premium payments.
SOURCE Consumer Federation of California