Car insurance rates are on the rise, with California being one of the states experiencing some of the fastest spikes in half a century. According to a report by Insurify, auto insurance rates in California are projected to soar by 54% in 2024. This increase is significant, especially considering that as of June, the average annual cost for full coverage was $2,417 in California, up 45% from the previous year.
One of the key factors contributing to the rise in auto insurance rates in California is the increase in auto thefts. The state has consistently had one of the highest rates of vehicle thefts in the country, which drives up premiums for all drivers. Additionally, insurance regulations in California, which are designed to protect consumers, have had unintended consequences. During the COVID-19 shutdowns, the state put a freeze on rate increases, leading to drastic hikes in 2023 once those restrictions were lifted.
Another factor impacting insurance premiums in California is Senate Bill 1107, which will increase minimum auto coverage requirements in the state. This legislation will double, and in some cases, triple the liability limits on policies, providing higher protection limits for drivers but also increasing the financial burden on insurers. As a result, insurers are raising rates to match the new requirements, leading to higher premiums for California residents.
Climate risk and severe weather events are also playing a role in driving up auto insurance rates in California. Growing damages from weather events, which comprehensive car insurance often covers, are changing how insurers set rates. Additionally, the rise in vehicle maintenance and repair costs due to newer vehicles with high-tech driver assistance features is contributing to the increase in premiums. While these safety technologies can help drivers avoid accidents, they are expensive to repair, leading to higher costs for insurers.
California is not the only state experiencing a significant increase in auto insurance rates. Minnesota and Missouri are also projected to see spikes of 61% and 55%, respectively, in 2024. However, California’s projected annual cost of $2,417 for full coverage is still higher than these states. As a result of the challenges insurers face in operating profitably in California, some companies have closed offices, stopped quoting via phone, or halted advertising in the state.
If more companies leave the state, it may prompt the California Department of Insurance to approve additional rate increases to keep insurers operating in California. As auto insurance rates continue to skyrocket, it is essential for drivers to be aware of the factors driving these increases and to shop around for the best rates and coverage options available to them.