From homeowners losing coverage to motorists facing soaring auto insurance bills, California’s insurance landscape is shifting faster than many residents can keep up with.
In a recent segment on CBS KCAL’s On Your Side, reporter Christine Lazar spoke with independent insurance agent Karl Susman about what’s driving the price hikes, how state regulations affect the market, and what consumers can actually do to save money right now.
The discussion highlights a critical reality: while inflation and disasters are major factors, California’s regulatory system—especially the rate-approval process—also plays a significant role in today’s volatility.
Why Insurance Costs Are Rising Along With Everything Else
When the cost of everyday life increases, insurance is not immune. As Lazar noted, consumers are feeling the pressure across the board, and insurance premiums are rising right along with gas, groceries, and entertainment.
According to Susman, higher premiums reflect broader economic forces:
- Auto parts and labor costs are at record highs.
- Accident frequency has rebounded since the pandemic.
- Claim severity has increased, meaning each claim costs insurers more.
- Weather-related losses from floods, wildfires, and hail continue to grow.
All of this makes insurance more expensive to provide. In most states, insurers can adjust rates more quickly. In California, however, the system often lags behind real-world costs.
How California’s Rate-Approval Process Creates Delays
Under Proposition 103, insurers must receive approval from the California Department of Insurance before changing rates. This law, passed in 1988, is designed to protect consumers from unjustified price hikes.
Insurers must prove with concrete actuarial data that an increase is necessary to remain solvent. While this protects consumers in principle, it also creates delays during periods of rapid inflation.
As Susman explained, when costs rise quickly, insurers may go years without being able to adjust premiums. By the time increases are approved, they are often large because they reflect years of suppressed pricing in a single correction.
Recent examples illustrate this “catch-up” effect:
- Farmers requested a 39.1% auto rate increase and received approval for roughly 30%.
- Other major carriers, including State Farm and Allstate, followed with double-digit increases.
To consumers, these jumps feel sudden and extreme. In reality, they represent years of accumulated losses being recovered all at once.
Why National Profits Don’t Mean California Is Profitable
Many consumers are confused when insurers report strong national profits while raising rates or pulling back in California.
Lazar cited national earnings reports showing strong revenue growth from major insurers like Allstate and Progressive. Yet those same companies claim they are losing money in California.
Susman clarified the disconnect: national profit figures reflect specific lines of business in specific regions. They do not necessarily represent auto insurance in high-cost, high-risk markets like California.
Dense traffic, expensive repairs, wildfire exposure, and strict rate regulation mean an insurer can be profitable nationally while operating at a loss locally.
Practical Steps Consumers Can Take to Save on Insurance
While inflation and regulation are outside individual control, Susman outlined several ways California consumers can still reduce their insurance costs.
Review and adjust your deductibles. Increasing your deductible means you assume more risk, which usually lowers your premium. Even a modest increase can lead to meaningful savings.
Monitor when tickets and accidents fall off your record. Surcharges typically last three to five years, but they do not always disappear automatically at renewal. If you’ve cleared that window, contact your agent and request a policy rewrite.
Shop around strategically. Even with some insurers scaling back, independent agents still have access to multiple markets. Comparing quotes across several carriers can uncover meaningful differences.
Bundle policies and use automatic payments. Combining home and auto insurance often produces multi-policy discounts. Automatic payments help avoid lapses, which can increase your risk profile and your premiums.
The Path Toward Market Stability Through Competition
Despite today’s volatility, Susman expressed cautious optimism about the future. In his view, prices will likely continue to rise until insurers reach a sustainable level of profitability that allows competition to return.
Once more companies feel confident operating in California, competition should increase. That, in turn, creates downward pressure on premiums through market forces rather than regulation alone.
True stability, however, depends on balance. Too much regulation can discourage insurers from participating. Too little can expose consumers to unchecked pricing. The challenge for California is maintaining both affordability and a healthy, competitive market.
What California’s Insurance Crisis Reflects About the Economy
California’s insurance struggles mirror broader economic pressures across the state. Inflation affects nearly every sector, but insurance is unique because pricing cannot respond quickly to changing conditions.
While most industries can raise prices dynamically, California insurers must wait for formal regulatory approval. This makes the system inherently reactive rather than proactive, especially during periods of rapid economic change.
What Consumers Can Expect Going Forward
Regulators continue to emphasize transparency and consumer protection. Insurers push for modernization, including more flexible rate-setting tools and forward-looking risk models. Consumers remain caught in between—seeking affordable, reliable coverage in an unstable environment.
Public education, like the CBS On Your Side segment, plays a vital role in helping Californians understand how the system works and how to advocate for themselves.
For many households, the most immediate form of financial protection is awareness: knowing when to call your broker, when to question a surcharge, and when to request a policy review.
Final Thoughts on California’s Insurance Crossroads
California’s insurance industry stands at a crossroads, pressured by inflation, natural disasters, and regulatory limits. While short-term pain appears likely, experts agree the long-term path forward depends on transparency, modernization, and renewed competition.
Until stability returns, consumers’ best defense is proactive management: shopping intelligently, reviewing policies regularly, and staying informed about how the system really works.
In a market this complex, knowledge may be the most valuable coverage Californians can carry.
