California could see car insurance rates soar by more than 50% this year: Here’s why
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Via: KTVU
OAKLAND, Calif. - A new report identified California among the three states that could see auto insurance rates spike by more than 50% by year’s end.
Insurance marketplace website Insurify said the Golden State had some of the fastest-rising auto insurance rates in the country, with a year-over-year increase of 45% as of June.
In June 2023, the average annual cost for full coverage was $1,666. A year later, the average spiked to $2,417, according to Insurify.
The report predicted the total increase in 2024 to be 54%, projected to soar to an average of $2,681.
Researchers said that among the factors that can drive up premiums were auto thefts.
The National Insurance Crime Bureau said nationwide, California accounted for the highest number of vehicle thefts last year.
Insurify also noted that insurance regulations in California, designed to protect consumers, have been a double-edged sword.
"During COVID-19 shutdowns, states like California put a freeze on rate increases. That’s why so many people saw drastic rate hikes in 2023 after those restrictions were lifted," said Mallory Mooney, Insurify’s director of sales and service.
Mooney said that some insurance companies were still playing catch up in California while others have pulled out of some markets entirely, so the industry continued to make adjustments.
The report also said that premiums were being affected by Senate Bill 1107, which will increase minimum auto coverage requirements in the state.
Insurify said the legislation will double, and, in some cases, triple the liability limits on policies.
For bodily injury or death of one person in any accident, the coverage will go up from $15,000 to $30,000.
For property damage per accident, it would go up from $5,000 to $15,000.
Signed into law by Governor Gavin Newsom in 2022, SB 1107 will go into effect on Jan. 1.
"This means California residents will see even higher premiums next year, albeit with higher protection limits as well. The higher limits will prevent more drivers from going into debt after a car accident, but since it increases the financial burden on insurers, they will raise rates to match the new requirements," the online insurance marketplace explained.
Insurify said another factor driving up rates was higher risk from severe weather.
"Climate risk has historically affected homeowners more than auto insurance — but growing damages from weather events, which comprehensive car insurance often covers, are changing how insurers set rates," researchers said.
The report also pointed to a rise in vehicle maintenance and repair costs due to newer vehicles having high-tech driver assistance features like lane departure and blind-spot warnings.
"Safety technologies can help drivers avoid crashes and accident-related premium hikes but are also expensive to repair," Insurify said.
Along with California, the other states where premiums are expected to spike more than 50% in 2024 were:
- Minnesota
- Missouri
- California
While Minnesota and Missouri were projected to have the largest increases in 2024, with spikes of 61% and 55% respectively, California’s projected annual cost of $2,417 for full coverage was still higher than the two states.
"California’s consumer protection laws keep insurance costs down for policyholders, but it’s difficult for insurers to operate profitably," Insurify said, adding, "GEICO has closed all its California offices, State Farm has stopped quoting via phone, and Progressive has halted advertising in the state."
Researchers noted that if more companies leave the state, it may prompt the California Department of Insurance to give the green-light to additional rate increases in an effort to keep insurers operating in the Golden State.
The Source
Insurify