Why is car insurance so expensive in California in 2023? (2024)

In 2023, California Insurance Commissioner Ricardo Lara approved more than $1 billion in auto insurance rate increases for insurers covering nearly half of the state’s registered vehicles. This figure equates to an average increase per policyholder of between $71 and $167, according to Santa Monica, California-headquartered advocacy organization Consumer Watchdog.

The increases include a $263.7 million rate jump for State Farm, the state’s biggest insurer, as well as Geico ($268 million rate hike), Interinsurance Exchange of the Automobile Club (IEAC, $202 million), Farmers ($167.8 million), Allstate ($165 million), and Mercury ($132 million).

Why are California drivers paying more for car insurance?

The rate increases approved by Lara represent a challenge for California drivers grappling with high inflation and rising interest rates.

Drivers pay $71 more with State Farm versus $80 more (per vehicle) with Mercury, $98 more with Farmers, $125 extra with Geico, $140 more with IEAC, and $167 more with Allstate.

Janet Ruiz, director of strategic communications for the Insurance Information Institute, isn’t surprised by the premium hikes.

“The rising inflation, cost of car repairs, shortage of auto parts, increased labor prices, shortage of labor, increased length of time to repair causing longer car rental periods, and the rise in claims litigation have increased the overall costs that insurers have paid in claims,” she says.“Bad driving has also increased the frequency and severity of claims. Fatalities have increased for the first time in several years. These factors have all contributed to the need to increase auto rates in California.”

She said Lara’s office didn’t approve rate increases for more than two years during the COVID crisis, and inflation has increased.

“But we’ve returned to and exceeded pre-pandemic levels of cars on the road, with increased frequency and severity of accidents occurring,” Ruiz says.

The post-pandemic insurance landscape in California

Gabriel Sanchez, press secretary for the California Department of Insurance, says that since taking office in 2019, Lara has pumped the brakes on rate increases in the state and protected consumers despite rates skyrocketing nationwide, holding increases at the lowest level in a decade.

“Under Commissioner Lara, insurance company rate increase filings are at their lowest number since 2012,” Sanchez says. “Commissioner Lara’s actions since July 2020 have returned more than $2.55 billion to auto consumers so far, and nearly $3.2 billion for all Covid-impacted lines.”

But Consumer Watchdog criticizes the move, claiming that low-income workers will pay up to 25% more for car insurance after these new hikes than professionals with college degrees.

“Under voter-enacted Prop 103, insurance companies have the burden to prove their requested rate hikes are justified. But by giving in to insurance company pressure to swiftly approve insurance companies’ requested rate hikes, the commissioner is short-circuiting the public scrutiny needed to ensure that excessive rates are not approved,” Pamela Pressley, senior attorney for Consumer Watchdog, said in a statement.

How to save money on car insurance in California

Worried about your auto insurance premiums going up in California? Ruiz recommended several ways to lower your insurance costs:

• Shop around. “Prices vary from company to company, so it pays to shop around and get at least three price quotes from different types of insurance companies,” she says.
• Compare insurance costs before you buy a car. Car insurance premiums are partly based on the vehicle’s price, repair expense, overall safety record and the likelihood of theft.
• Request a higher deductible. “For example, increasing your deductible from $200 to $500 could reduce your collision and comprehensive coverage cost by 15 to 30%,” Ruiz says.
• Reduce coverage on older cars. Consider dropping collision and/or comprehensive coverage on older vehicles. “If your car is worth less than 10 times the premium, purchasing the coverage may not be cost-effective,” Ruiz says.
• Bundle your policies. Purchase homeowners and car insurance from the same insurer to qualify for a discount, if available.
• Take advantage of low mileage discounts. Some insurers offer lower costs to motorists who drive fewer miles per year.
• Maintain good credit. Most insurers use credit information to price auto insurance policies.
• Seek out discounts. These include discounts for taking a defensive driving course, having a good student young driver, and maintaining a safe and clean driving record.

Final thoughts: Car insurance rate increases in California

Car insurance costs are on the rise nationwide. California residents can save money on car insurance by getting quotes from other insurance companies around renewal time and asking about discounts.

Resources & Methodology

Sources

1. Consumer Watchdog. “Commissioner Lara Approves Over $1 Billion in Unjustified Auto Insurance Rate Hikes.” Accessed April 2023.
2. Los Angeles Times. “California State Farm car insurance customers to see a $264-million rate increase.” Accessed April 2023.