Major auto insurers are pulling out of the California market because they say our drivers are simply too expensive to insure.
Californians drive about as much as they did before the pandemic, but apparently not as well.
There are more car accidents and some insurance companies say they pay out more than they take in. But the insurance commissioner says the facts do not support their claims.
According to the American Property Casualty Insurance Association, auto insurance losses rose 25% from 2020 to 2021, while premiums rose only 4.5%. The number and severity of car accidents have increased, as has the cost of covering them.
“The cost to rent a car is up 33% and the cost to buy a new car is up 11%,” says Denni Ritter, American Property Casualty Insurance Association.
In California, some insurers have not seen a rate increase approved by the insurance commissioner for more than 3 years.
“What we’ve seen is that you have insurers paying out more claims than they’re getting in premiums. That’s not a sustainable business model,” says Ritter.
California is a very consumer-friendly state and insurers must approve any rate increase. State Farm, AllState and Farmer’s are asking the California Department of Insurance for a nearly 7% premium increase. Progressive is asking for over 19%. A local agent says insurers are now making it more difficult for him to get new car policies for drivers.
“They could ask you to pay in full instead of having a payment plan. Right now, all the carriers I can think of have restrictions. They literally say don’t write please,” says 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 anymore by calling them. You have to go to an agent’s office,” said Susman
A spokesman for the Insurance Commissioner says: “While insurance companies are focused on raising rates, the insurance department is focusing on protecting drivers and helping them get the most value out of the premiums they pay.”
His office points out that the commissioner saved Californians $2.4 billion in reduced premiums during the height of the covid stay-at-home order — when the industry was still collectively racking up $42 billion in excess premiums.
Insurers can’t refuse to cover Californians since we’re a so-called “take all market,” but agents say to go with smaller, lesser-known carriers if customers need insurance quickly.