California Regulators Grant Auto Rate Hikes Up to 31%; 75 Requests Still Pending

California regulators are approving strong private passenger automobile insurance rate increases, with a significant number in the 21% to 31% range.

Source: AM Best | Published on January 17, 2024

Newsom to allow higher insurance rates

California regulators are approving strong private passenger automobile insurance rate increases, with a significant number in the 21% to 31% range.

The California Department of Insurance cleared at least 22 personal auto rates hikes to take effect from November 2023 through April 2024.

The department was still reviewing 75 auto insurance rate change requests on Jan. 10, spokesperson Michael Soller said.

Direct combined ratios for the largest personal auto insurance writers in California worsened to 104.2 or higher in 2022, two years after the COVID-19 pandemic improved ratios by as much as 18.7 points.

Carriers said rate hike approvals lagged need caused largely by sharply higher auto repair and replacement costs and rising claims severity.

Allstate Chairman, President and Chief Executive Officer Tom Wilson in November warned the company would drop brand auto coverage in California if regulators didn’t approve rate increases for 2024.

Allstate sought a 35% rate hike in California last year and strong double-digit increases in New York and New Jersey. President Mario Rizzo said new business applications in the three states were down 75% on actions Allstate took while the requests were pending.

Now rates are rising. And the CDI has cracked down on waiting periods, questionnaires and other practices auto carriers apparently initiated in violation of state laws and regulations, Commissioner Ricardo Lara said recently.

Consumer Watchdog intervened in rate hike requests from four carriers recently and said two of them, No. 1 all-private passenger writer State Farm and No. 3 Allstate, agreed to fully resume auto applications.

Both carriers in emails confirmed they have reopened online applications. Each said auto coverage had been sold continuously by their captive agents in California.

Insurers filed revised underwriting guidelines with the CDI and reversed multiple earlier moves that resulted in reinstatements, Lara said, because carriers must offer and sell coverage to all defined “good drivers,” based on three years of driving history.

Consumer Watchdog challenged double-digit auto and homeowners rate hikes resolved in the past two months by State Farm, Allstate, Pacific Specialty and Geico, saying its intervention will save California policyholders $884.8 million and benefit consumers in other ways, such as expanded auto quoting.

“If proposed rates are excessive, the department requires insurance companies to reduce the proposed rates. When rate filings are approved, it is not due to one party, but to a joint effort to resolve any issues by the department, insurance companies and, in some cases, public intervenors,” said Soller at the CDI.

State Farm was approved for a 21% private passenger rate hike at the end of the year. It takes effect in late February.

State Farm agents never stopped quoting auto policies for eligible California customers, said spokesperson Angie Harrier.

State Farm and Allstate declined comment on Consumer Watchdog assertions that auto rate filings overstated projected claims payments and included expenses for ads designed to improve the company’s image, rather that to sell a specific product.

Consumer Watchdog said California makes a distinction and bars expenses for institutional ads from rate calculations. Geico did not respond to a request for comment on the same allegations by Consumer Watchdog.

“State Farm is committed to working cooperatively with public policymakers and officials on reforms that promote market stability and the long-term interests of our California customers. We continue to look for ways to maintain competitive rates and help our customers manage” risk, said Harrier.

The highest overall effect of a private passenger auto rate increase enacted since the start of November in California was 31.1% for Nationwide subsidiary Crestbrook Insurance Co., according to Best’s State Rate filings.

Various sub-lines of two Allstate subsidiaries closely followed — 30% for Allstate Northbrook Indemnity Co. and 29.8% for Integon National Insurance Co. The latter also received approval for a 22.5% increase, all effective in February.

Nationwide Insurance Company of America was granted a 27.6% overall rate hike and American Family Connect Property and Casualty Insurance Co., 24.9%.

USAA’s Garrison Property and Casualty Insurance Co.’s 17% hike is effective this month, as are 6.9% increases each for subsidiaries USAA General Indemnity Co., USAA Casualty Insurance Co. and United Services Automobile Association.

Berkshire Hathaway Insurance Group is the second-largest personal auto writer in California. Four of its Geico companies may raise overall rates between 14.7% and 10.7% in late April.

Progressive Chief Executive Officer Tricia Griffith repeatedly says her company likes to take “small bites of the apple.” Subsidiary United Financial Casualty Co.’s 6.9% rate hike was effective in November.

Rex Frazier, Personal Insurance Federation of California president, recently said the CDI can “lose control” of the rate approvals process if an insurer seeks a rate increase of 6.9% or more, because an intervenor can demand a trial, which is “at least a nine-month process” and end with a claim by the intervenor for legal fees of $200,000 or $300,000. This can happen even if the intervenor contradicts the will of the CDI, he said.

Other carriers approved for 6.9% higher auto rates included two Farmers Insurance Group companies, Allstate’s Esurance, an Auto Club Enterprises Insurance Group subsidiary and Aspire General Insurance Co.

The top five writers of all private passenger auto insurance in California in 2022, based on direct premiums written, were: State Farm Group, with a 12.39% market share; Berkshire Hathaway Insurance Group, 11.79%; Allstate Insurance Group, 10.73%; Farmers Insurance Group, 10.22%; and Auto Club Enterprises Insurance Group, 9.27%, according to BestLink.