Auto Insurance

Published Date: 10/15/2023

The auto insurance industry in California is currently facing challenges due to increased claims costs coupled with an extended period without rate increases approved by the Department of Insurance. Key points discussed include:- Auto insurance companies are losing money on policies due to increased costs for repairs, replacement parts, rental cars, and labor. These inflationary pressures mean claims payouts exceed premiums collected. - There was a 31-month period where no rate increases were approved, despite the increased costs insurance companies were facing. This resulted in significant losses.- Rate recovery is now happening, with the Department of Insurance approving justified rate increases to bring premiums in line with claims costs and keep insurers solvent. - Once rate recovery is complete, likely within the next 60 days, insurers will resume normal operations and market competition will increase, bringing rates back down from current highs.- Rates will likely remain higher than historic norms due to ongoing inflationary pressures, but should moderate once competition resumes. The message is to expect high rates temporarily until market equilibrium is restored.