(Airdate: 2024-01-19) ABC - KXTV - Rising Car Insurance Costs

Published Date: 01/19/2024

Why California Car Insurance Rates Are Rising — And What Drivers Can Do About It

If you’ve noticed your car insurance bill climbing lately, you’re not alone. Across California, millions of drivers are being hit with higher premiums — sometimes by hundreds of dollars per year. For many households, the increases come on top of other rising costs like fuel, groceries, and rent, making driving more expensive than ever before.

In a recent ABC10 (KXTV) segment, insurance expert Karl Susman, president of the Susman Insurance Agency, broke down why car insurance costs are surging and what drivers can do to minimize the impact. His insights reveal a combination of technology, economics, and post-pandemic market correction that’s reshaping the auto insurance landscape statewide.

The Numbers: A Statewide Squeeze

California is home to more than 27 million licensed drivers, and nearly all of them are feeling the pressure. “It’s ridiculous,” one Sacramento driver told ABC10. “They’re going up like crazy.”

Another driver added: “I bought a new vehicle, compared it with a couple of family members and friends, and it’s much different than years ago.”

These stories echo a broader trend across the state and the nation. According to the U.S. Bureau of Labor Statistics, auto insurance costs rose more than 20% nationwide in 2023—one of the steepest jumps in decades. And California, long known for its consumer-friendly but tightly regulated insurance market, is now seeing those delayed increases catch up all at once.

Why Premiums Are Rising

Susman explained that today’s higher prices aren’t arbitrary — they’re the result of three key forces: technology, inflation, and a regulatory “boomerang effect.”

1. Cars Are More Expensive to Fix Than Ever

“Every accident costs thousands of dollars,” Susman said. “Where there used to be smaller claims, now even a fender bender can turn into a major expense.”

Modern vehicles are equipped with a suite of high-tech features — from parking sensors and adaptive cruise control to rear cameras and LiDAR systems — that make even minor repairs costly.

“Ten or fifteen years ago, if you damaged your bumper, a body shop could knock it out, rebuff it, and you’d be fine,” Susman explained. “Now, that same bumper has cameras and sensors built in. You can’t just have anyone install it — it requires specialized parts and technicians.”

That complexity means higher repair costs, longer repair times, and more expensive claims for insurers. Add ongoing global supply chain shortages for parts, and the financial strain compounds even further.

2. The Pandemic Delayed the Pain

During the height of COVID-19, the California Department of Insurance (CDI) placed a virtual freeze on premium increases to ease financial burdens for consumers. While that offered short-term relief, it created long-term imbalance.

“Even though inflation was going up, we had labor shortages, we had parts shortages — all of that,” Susman said. “But the premiums we were paying stayed the same. Now, they’re coming back.”

This “boomerang effect,” as Susman calls it, means insurers are now playing catch-up. After several years of suppressed rates and rising claim costs, companies are seeking large increases to remain solvent and competitive.

3. More Accidents, Higher Payouts

Adding to the challenge is a surprising statistic: the frequency of accidents has nearly doubled since before the pandemic.

“Frequency is way up,” Susman said. “No idea why.”

Experts believe a mix of factors could be to blame: increased speeding during lockdown periods, distracted driving from mobile devices, and a nationwide spike in road fatalities since 2020. Whatever the cause, more accidents mean more claims — and that translates directly into higher costs for everyone.

What Drivers Can Do to Save

While drivers can’t control inflation or industry regulation, there are practical steps to reduce the sting of higher premiums. Susman offered several key recommendations:

1. Drive Safely — It Really Matters Now

Insurers calculate premiums largely based on your driving record. Even a single at-fault accident or speeding ticket can raise rates dramatically.

California’s insurance pricing system, regulated under Proposition 103, prioritizes three main factors:

1. Driving safety record
2. Annual mileage
3. Years of driving experience

That means safe, consistent driving still pays off. With accident frequency on the rise, avoiding claims can make a meaningful difference.

2. Avoid Filing Small Claims

Susman cautioned drivers to think twice before filing a claim for a small amount.

“Don’t put in a claim that you can afford to pay,” he advised. “You’ll end up paying a higher premium, and you’ll eat through that money you would have paid up front anyway.”

Insurance is designed to protect against major losses, not minor repairs. Filing small claims can trigger rate hikes and potentially disqualify you from certain discounts.

3. Consider Raising Your Deductible

A higher deductible — the amount you pay out of pocket before insurance kicks in — can significantly lower your monthly premium.

For instance, increasing a deductible from $500 to $1,000 may save 10–20% annually, depending on your insurer. But Susman warned: “Just don’t go without insurance altogether.”

That might sound obvious, but with affordability shrinking, some Californians are considering dropping coverage entirely — a risky move with serious legal and financial consequences.

4. Stay Consistent — and Don’t Let Policies Lapse

With the market in transition, Susman urged drivers to hold on to existing policies and avoid coverage gaps.

“We’re in a transition period,” he said. “Hold on to the policies you have, put them on auto-pay, don’t let them lapse, and stand by — hopefully, things will get better.”

A lapse in coverage not only exposes you to risk but can also reset your insurance history, often resulting in higher rates when you try to reapply.

The Broader Picture: Industry Turbulence

The challenges facing car insurance mirror what’s happening in homeowners insurance across California. In both markets, insurers are grappling with climate-related losses, inflation, and regulatory lag.

Several major carriers — including State Farm, Geico, and Allstate — have implemented or requested double-digit rate increases for auto insurance in the past year. Geico’s average increase in California was roughly 13%, while Allstate’s climbed as high as 30% in certain areas.

At the same time, many insurers have tightened underwriting standards, becoming more selective about whom they insure. This means maintaining a clean record and consistent payment history is more critical than ever.

Electric Vehicles: The Hidden Cost Factor

Susman’s analysis also dovetails with broader industry developments involving electric vehicles (EVs). Just last week, Reuters reported that Hertz — one of the world’s largest car rental companies — is selling off 20,000 EVs from its U.S. fleet.

The reason? Repair costs.

The company found that fixing damaged electric vehicles was significantly more expensive than repairing their gas-powered counterparts. High-voltage batteries, proprietary parts, and specialized technicians all contribute to the higher expense.

This reinforces a growing realization across the insurance sector: as vehicles become more advanced, the cost of insuring them inevitably rises.

What to Expect Next

Looking ahead, experts predict that 2024 will be a transition year. Rates will continue to rise through midyear as insurers adjust to inflation and recalculate risk. However, the market may begin to stabilize by late 2024 or early 2025 as claim trends normalize and competition rebalances.

Susman remains cautiously optimistic:

“We’re seeing the industry adapt, just like it always does. It’s going to be rough for a bit, but eventually, things will level out.”

For now, drivers should focus on control where they can: safe habits, smart policy management, and informed decision-making.

Key Takeaways for California Drivers

   Challenge Driver Strategy     Skyrocketing repair costs Choose repair shops with insurer partnerships to minimize out-of-pocket expenses.   Regulatory catch-up Expect higher rates but know they’re likely temporary.   Accident frequency Maintain a clean driving record to avoid additional surcharges.   Inflation pressure Raise deductibles strategically and review discounts annually.   Market volatility Keep your policy active and avoid lapses.   

Final Thoughts

California’s car insurance market is navigating a complex mix of technology, economics, and policy correction. While the short-term outlook includes higher costs, these shifts are part of a necessary recalibration after years of underpriced risk.

For now, as Susman advises, drivers should stay the course: keep coverage active, drive safely, and weather the storm.

Insurance markets are cyclical, and just like the vehicles they cover, they eventually find their balance — it’s just taking a few bumps in the road to get there.