The major auto insurers are pulling back on the California market because they say our drivers are too expensive to insure.
Californians drive just as much as they did before the pandemic, but apparently not as well.
Car accidents are on the rise, and some insurance companies say they are paying more than they are getting. But, the insurance commissioner says the facts do not support his claims.
From 2020 to 2021, auto insurance losses increased 25% while premiums increased just 4.5%, according to the American Property and Casualty Insurance Association. The rate and severity of car accidents have increased, as have the costs to cover them.
“The cost of renting a car increased 33% and the cost of a new vehicle increased 11%,” said Denni Ritter of the American Property and Casualty Insurance Association.
In California, some insurers have not seen a rate increase approved by the insurance commissioner in over 3 years.
“What we’ve seen is that there are insurers that are paying out more in claims than they’re getting in premiums. That’s not a sustainable business model,” Ritter said.
California is a very consumer-friendly state and insurers must be approved of any rate increases. State Farm, AllState and Farmer’s are applying to the California Department of Insurance for a premium increase of nearly 7%. Progressive is asking for more than 19%. A local agent says insurers are now making it difficult for him to get new auto policies for drivers.
“They may ask you to pay in full instead of having a payment plan. Right now, every company I can think of has restrictions. They literally say, don’t write, please,” said Karl Susman of Susman Insurance.
Geico closed all of its California offices and Progressive stopped advertising in the state.
“State farm, you can’t get quotes by calling them anymore. You have to go to an agent’s office,” Susman said.
A spokesperson for the Commissioner of Insurance says that “while insurance companies are focused on raising rates, the department of insurance is focused on protecting drivers and helping them get the most value from the premiums they pay.”
His office notes that the commissioner saved Californians $2.4 billion in reduced premiums during the height of the Covid-19 stay-at-home order, when the industry was still collecting a total of $42 billion in excess premiums.
Insurers can’t refuse to cover Californians since we’re called a “global market,” but agents say they have to go with smaller, lesser-known companies if customers need insurance quickly.