Company officials announced that California drivers would have to pay 30% more for vehicle insurance coverage, on average. The rate hike was approved in December, officials said during an earnings call. Some people will see increases as small as 10% and others will be hit with rates going up as much as 55%, a California Department of Insurance spokesperson to the San Francisco Chronicle. Last year, the company paused direct sales of new auto insurance policies made online or by phone, however, people could still get policies through agents. Now, new policies can be obtained through agents or direct sales. California isnt the only place experiencing rate increases; Allstate approved 14.6% and 20% rate increases for New York and New Jersey, respectively. Allstate wasnt the only company to implement rate hikes for California customers. State Farm and Geico were also approved for 21% and 12.8% rate hikes, respectively.
Some California drivers say they're waiting longer than usual to get coverage and must pay premiums up front. During the beginning of the pandemic, the state approved fewer rate increases because fewer people were on the roads. Now, insurers say they're trying to catch up. They say there are more accidents, and when they have to pay out insurance claims, the payouts cost more. They say that's because of higher labor costs, that cars are just more expensive these days because of inflation and lingering supply chain issues. Insurers are also saying it's particularly hard in California for them because it has a lot of regulations that they've long complained about. California has Prop 103. It's a consumer protection law that goes back to the 1980s. It requires insurers to justify why they're asking for rate increases before the state approves them. Some insurance companies have become reluctant to do business in California, which has prompted the state to raise rates after all.
The insurance department also is in the middle of setting new regulations for fire insurance as some of the biggest insurers have pulled out of California, citing increased wildfire risks. That has led to skyrocketing premiums that some homeowners have said they cant afford. Gov. Gavin Newsom issued an executive order in September directing the insurance commissioner, Ricardo Lara, to try to solve the problem. In California, drivers who have had a license for the past three years and have not had more than one point on their record within that period are considered good drivers. California is one of only four states that requires insurers to sell insurance to good drivers, and is the only state that requires insurers to offer good drivers a 20% discount. The state insurance department has approved a total of 111 rate increases so far this year. The department is reviewing 80 more such requests filed this year.