In a NutshellCalifornia’s insurance department has its reasons for not approving a rate increase for personal car insurance in more than two years. But insurance companies now say they’re shying away from doing business in the state because existing rates are too low amid rising costs.
Big auto insurance companies like GEICO, State Farm and Progressive do business nationwide. But individual states have the power to regulate insurance companies — and shape what they can do within state lines.
Each U.S. state has a Department of Insurance tasked with licensing and overseeing insurance companies doing business in their state. While laws differ from state to state, in many cases, these departments also have significant power to dictate whether insurance companies can raise their rates. In these states, insurers must submit a request to raise rates and provide documents that show why they need to. The insurance department can approve or deny the request.
This regulated process is meant to help states balance two needs: to make sure insurance companies can charge high enough rates to remain solvent — but also to protect consumers from excessive price increases.
In California, the insurance department hasn’t approved a rate increase for personal car insurance in more than two years, since the start of the COVID-19 pandemic. But insurers say they must start charging higher rates to keep up with rising costs and sustain operations in the state.
Let’s take a closer look at the issue and how insurance companies are responding.
- Average cost of car insurance in California
- Comparing car insurance rates in California vs. other states
- Have California life and health insurance rates increased?
- Does filing a claim increase my car insurance in California?
- Does getting a ticket affect my car insurance rates in California?
- FAQs about auto insurance rates in California
Average cost of car insurance in California
In a recent Credit Karma study of Quadrant auto insurance rate data, we looked at adult drivers with a single car on their policy and zero tickets or claims between October 2019 and April 2022 (see full methodology). Among this group, the average car insurance premium in California is $265 (as of April 2022), down 11% since July 2020.
From July 2020 to October 2021, this same group of California drivers saw a drastic decrease (18%) in average auto insurance premiums, with rates dropping from $299 to $246. Rates have since increased to $265 as of April 2022.
Comparing car insurance rates in California vs. other states
When looking at premium costs for adult drivers with the same single-car, zero-incident profile across the U.S., we find that California’s average auto insurance premium is more expensive than those of Oregon ($162), Washington ($174) and Nevada ($213), but is cheaper than neighboring Arizona ($282), according to the Quadrant data.
California’s average rate of $265 ranks 42nd nationwide — comparable to South Carolina ($254), Georgia ($263), Kentucky ($281) and Arkansas ($294).
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Why haven’t auto insurance rates increased in California since 2020?
In March 2020, California instituted a “stay at home” order to stem the spread of COVID-19, closing businesses and schools across the state. That meant a lot fewer cars were on California’s roads. In response, California Insurance Commissioner Ricardo Lara ordered insurance companies to refund drivers a portion of the premiums they paid for their car insurance.
The insurance commissioner initially stated that the action put about $2.4 billion back in California drivers’ pockets. But in March 2021, Lara announced that data collected by the department showed some insurers had only partially complied with the order — and that, on average, they had over-collected premiums and didn’t return enough to drivers.
Lara’s office has since taken a much harder look at proposed rate increases for personal auto insurance policies. No rate increase requests have been approved since the start of the pandemic. That helps explain why our Quadrant data shows insurance rates in California have yet to return to prepandemic heights, even as COVID restrictions have largely disappeared.
On a national scale, the insurance industry argues that rebates returned by companies during the pandemic were plenty — and that, because of a high number of fatalities on the road during the pandemic, claims costs during that time were significant.
Are auto insurers pulling back from California?
Dozens of insurance companies, including some of the largest, have filed requests to raise their auto insurance rates in California in 2022. These requests are all still pending, but none have been approved.
In response, GEICO has closed all its physical sales offices in the state, though California drivers can still obtain policies online. Progressive CEO Tricia Griffith told investors in August that her company “would love to write more business” in California if it’s “able to get adequate rates.” A Liberty Mutual executive also told investors his company has been “dialing back” marketing and growth in the state.
The president and CEO of Kemper, Joseph Lacker, also expressed reluctance to write new business in the state. During a recent earnings call, Lacker said that, according to his analysis, the premium refunds were more than adequate, and Kemper’s request for a rate increase is justified.
Such statements raise the question of whether California drivers will at some point have fewer options when shopping for a new auto insurance policy or renewing their current ones.
Have California life and health insurance rates increased?
While auto insurance rates have decreased in California since 2020, prices for life and health insurance have gone up. In fact, health insurance rates in California rose an average of 2.5% in 2022, according to the state Department of Managed Health Care.
Does filing a claim increase my car insurance in California?
Filing a claim can increase the price you pay for car insurance. When you file a claim, your insurance company will look into the circumstances and evaluate whether the damage caused to your vehicle was your fault. If it was, the insurance company may increase your premiums. This higher price can last for about three years.
Remember that even though your premiums may rise, reporting accidents to your insurance company can also help protect you. If you don’t report an accident and the other driver ends up suing you, you won’t have the benefit of your insurance to back you up.
Does getting a ticket affect my car insurance in California?
Your driving record, including moving violations and tickets, typically affects the price you pay for car insurance. Insurance companies set prices based on an evaluation of driver risk, and they look at tickets as an indication of unsafe driving. Serious violations may even result in you not being able to renew your insurance policy.
FAQs about auto insurance rates in California
The costs of buying and maintaining a vehicle have skyrocketed in 2022. New-vehicle prices reached an average of $46,259 in August, according to research from J.D. Power and Associates, a new record and up 11.5% from a year ago.
The used car market isn’t much better: Prices for used vehicles have spiked since 2020, according to data from the Federal Reserve of St. Louis, and are up nearly 8% from last year. That’s on top of a more than 20% increase in used car prices in 2021, according to the Bureau of Labor Statistics.
Material availability and prices are a big reason why. A shortage of computer chips used in vehicle manufacturing has slowed production. Amid inflation and the war in Ukraine, the price of the raw materials needed to make cars reached an all-time high last year, according to research from J.P. Morgan Chase. That caused demand for used vehicles to spike, driving up prices.
Higher vehicle prices mean larger loan payments. Costlier cars can be more expensive to replace and may require higher coverage levels, yielding higher insurance premiums.
Yes, in many states, auto insurance premiums are rising quickly. Rates that have gone into effect in 2022 have driven the cost of premiums up an average of 4.3% nationally, according to a report from the credit bureau TransUnion.
Premiums have increased much more in some states. For example, in a recent Credit Karma study of Quadrant rates, we found that a generic driver persona can expect to pay 30% more for car insurance rates in 2022 than in 2021.
The Insurance Information Institute cites data showing that vehicle accidents and automotive fatalities have increased significantly, leading to more insurance claims and payments. Replacement parts have also increased in price, making it more expensive to repair cars.
The state of California requires all drivers to prove that they can be financially responsible for damage in an accident. In most cases, this comes in the form of an auto insurance policy. The state requires liability coverage, which covers damage to the other vehicle’s driver if you cause an accident. The following minimum levels of liability coverage are required in California:
● $15,000 for injury or death of one person
● $30,000 for injury or death of multiple people
● $5,000 for damage to property
Usage-based insurance, also sometimes known as “pay-as-you-drive” or “pay-per-mile” insurance, is available in California — but some insurance companies’ programs are not fully in use there. That’s because the state has largely banned telematics, or technology that tracks and measures driver behavior like location, speed, braking, acceleration and time of day. Only the number of miles driven may be considered in setting insurance rates.
In most areas, companies offering usage-based insurance charge a base rate and then a rate per mile. This means that people who drive relatively little will pay a much lower rate, cheaper than most traditional car insurance policies. Insurers also offer discounts to people who drive safely, as recorded through telematics devices.
To identify auto insurance rate changes by state, we analyzed Quadrant Information Services data from October 2019, July 2020, February 2021, October 2021 and April 2022. Mention of the year 2020 references data from July 2020. Mention of the year 2021 references data from October 2021, and mention of the year 2022 references data from April 2022, unless noted otherwise.
Rates provided fit the following profile, unless noted otherwise: The driver is age 18 or older, drives a car with any value and drives any number of miles per year. The driver has been continuously insured for at least three years, has one vehicle on the policy, is the only driver, and has no claims or tickets.
Quadrant Information Services doesn’t include all insurance companies in the rate data it provides. These are estimated rates meant only to provide a frame of reference and comparison. Your rate may vary depending on a range of factors, such as your age, vehicle driving habits and history. Note that the rates are provided every six months by Quadrant Information services.
All average rate data is rounded to the nearest whole number.