Auto insurance rates in California have increased by 45% in a year.
The average annual premium in California was $2,417 for full coverage in June 2024, up from $1,666 in June 2023, according to Insurify, an insurance comparison platform. That’s a 45% increase from the same month a year earlier.
The company expects premiums to continue to rise in the second half of the year, jumping 54% compared to June last year. The average annual auto insurance premium in the state is expected to be $2,566 at the end of the year, $149 more than in June. That’s the third-highest projected rate increase in the country, behind Minnesota (61%) and Missouri (55%). The company estimated the June increase and the projected year-end increase based on 97 million auto insurance policies in its database.
The reason for the increase, which is double the national average, is due to the state’s insurance system. All insurers operating in California must be authorized by the state’s Department of Insurance to raise premiums. During the pandemic, the state did not approve insurers’ requests for increases.
Accordingly, the auto insurance conglomerates have also scaled back operations in the state, citing the financial burden of frozen premiums. Geico has closed all of its offices in the state, and Progressive is not running advertisements targeting residents.
Insurers have canceled or refused to renew car insurance policies for the slightest mistake or deterioration in a driver’s record. As insurers pulled out of the state, the insurance department granted companies’ requests for steep rate increases, and auto insurance rates dramatically skyrocketed.
Industry analysts say the increase in auto insurance premiums is being driven by a combination of more vehicles on the road, more accidents, higher labor costs, soaring vehicle prices and repair costs, and sharply rising loss ratios for insurers, especially since the pandemic.
Worse yet, next year is expected to bring even bigger increases. The state assembly passed a bill increasing the minimum liability insurance limits in 2022, and Governor Gavin Newsom signed it into law. The law, which doubles the minimum per-person and total liability limits from $15,000 and $30,000 per accident, respectively, will take effect on January 1, 2025. Industry expectations are that this will trigger a flurry of requests from auto insurers for large rate increases.
As of June, the national average annual premium was $2,329. That’s a 15% increase from 2023. The average premium is forecast to reach $2,469 by the end of 2024, up 22% from last year.
BY WONHEE CHO, HOONSIK WOO [cho.wonhee@koreadaily.com]
