By Mike Ahuja

A New Congressional Proposal Would Require Insurers to Return a Portion of Unused Premiums After Three Claim-Free Years

Every month, millions of Americans write checks to insurance companies — for their cars, their homes, their teeth, their health — and pray they never have to use any of it. And when they don’t? The insurance company keeps every dime. A new legislative proposal moving through congressional discussions aims to change that dynamic in a fundamental way, and consumer advocates say it’s long overdue.

The proposed Premium Rebate Act would require insurance companies of all types — auto, health, dental, homeowners, renters, and beyond — to return between 25 and 50 percent of the premiums paid by a policyholder who has filed zero claims over a rolling three-year period. That return could come in the form of a direct check, a credit applied to the account, or a meaningful discount off future payments. The choice, notably, would belong to the customer.

The Argument: Your Insurer Is Acting Like a Bank

At its core, the case for this legislation rests on a simple and uncomfortable truth: insurance companies don’t just hold your premiums in a vault waiting for a rainy day. They invest in them.

From the moment a premium payment lands in an insurer’s account, that money is put to work — in bonds, equities, real estate, and other financial instruments. The returns generated from those investments are a significant and largely invisible revenue stream for the industry. In 2023 alone, the U.S. property and casualty insurance sector reported over $70 billion in net investment income. Health insurers added tens of billions more.

When you deposit money in a savings account, your bank pays you interest. When your insurance company holds your premiums for years without ever paying a claim on your behalf, they collect the interest — and you collect nothing.

Supporters of the Premium Rebate Act argue that this arrangement is fundamentally inequitable. “If the insurance company is functioning as a financial intermediary — holding your capital, investing it, and profiting from it — then the customer has a rightful claim to some portion of those returns,” one policy analyst summarized. “The claim-free policyholder is, in effect, an involuntary investor getting zero yield.”

Why Three Years and Why 25 to 50 Percent?

The three-year threshold was deliberately chosen. One or two claim-free years is relatively common and doesn’t necessarily signal that a customer is being systematically over-charged for the risk they represent. Three consecutive years, however, is a meaningful pattern — it suggests the insurer has been collecting premiums well in excess of the actual risk presented by that individual customer.

The 25 to 50 percent rebate range allows for regulatory flexibility. Insurers operating in higher-risk markets or regions with elevated claim probabilities could qualify for the lower end of the rebate scale. Those in more stable markets with historically low claim rates among their customer base would be expected to return closer to 50 percent. The Federal Insurance Oversight Board, or an equivalent regulatory body, would be tasked with setting annual guidelines based on actuarial data.

What the Industry Says

Predictably, the insurance industry has pushed back. Trade groups argue that premiums are calculated based on pooled risk — that the premiums of the many fund the claims of the few — and that mandated rebates could destabilize that model. They warn of potential premium increases for higher-risk customers as companies seek to recapture projected refund costs.

Critics of this counterargument note that it ignores decades of record industry profits. The insurance sector has consistently posted strong earnings even through economically turbulent periods, suggesting that the pooled-risk model is more than adequately funded.

A Simple Principle

What the Premium Rebate Act ultimately stands for is a realignment of fairness. Loyal, low-risk customers have subsidized the insurance industry’s investment portfolios for generations without any return on that contribution. Three years of paying faithfully without receiving a dollar in claims is not just loyalty — it is, by any honest financial measure, a deposit that deserves some form of dividend.

The legislation doesn’t ask insurers to give everything back. It asks for a reasonable acknowledgment that the money belongs, at least in part, to the people who earned it.