California drivers who use State Farm for their auto insurance coverage face a premium increase of $263.7 million, the highest total amount approved since October by the California Department of Insurance.
State Farm insures more California drivers than any other company operating in the state. Those 3.7 million California drivers will see an average annual increase of $71 per policy, or a 6.9% increase, said Consumer Watchdog, a Santa Monica-based advocacy group.
The latest increase granted by California Insurance Commissioner Ricardo Lara follows rate hike approvals for several other major auto insurers, including Geico and Mercury Insurance, after a long hiatus from the COVID-19 era.
In total, Lara has approved more than $1 billion in premium increases at the state’s six major companies, which insure about 48% of California’s registered vehicles. Consumer Watchdog called it “unjustified and excessive”. Low-income drivers will be hardest hit, the group said.
“The department just rolled out, and rushed, increases in each of these cases without full justification for any of them,” said Carmen Balber, executive director of Consumer Watchdog, adding that it ignores the demands. to justify these increases that were set forth in Proposition 103, the state law on auto, home, and property and casualty insurance rates.
Balber saw “a disturbing picture” of the department “approving what now amounts to more than $1 billion in rate increases without the proper oversight.”
Lara did not specifically address the State Farm case, but he said through a spokesperson that there was nothing excessive about the approved rate hikes.
“Commissioner Lara’s actions since July 2020 have so far returned more than $2.55 billion to auto consumers,” said Gabriel Sanchez, press secretary for the Department of Insurance, “and he continues to examine data from insurance companies to determine if they have overcharged drivers during the pandemic.”
“Since 2019, Commissioner Lara has held back rate increases in California and protected consumers despite skyrocketing rates nationwide, keeping increases at the lowest level in a decade,” Sanchez said.
State Farm announced record 2022 underwriting losses in February, saying, “While State Farm has experienced unfavorable operating results in automobiles, State Farm Mutual Automobile Insurance Company remains financially strong.” State Farm, which underwrites auto insurance in all 50 states, said the auto segment accounted for an underwriting loss of $13.4 billion on $45.7 billion in earned premiums.
State Farm spokesman Sevag Sarkissian said in an email that the insurer “continually monitors and adapts to trends to ensure we match the price to the risk.”
“As more people are on the roads, we are seeing an increase in claims. Auto claims costs are being compounded by record inflation and supply chain disruptions. All of this has increased the cost of labor and materials, which translates into higher auto repair costs,” he said.
According to Consumer Watchdog’s tally of rate increases approved so far, drivers at the Auto Club’s Interinsurance Exchange will pay an additional $75 per insured vehicle. Mercury insureds will pay an additional $80 per insured vehicle. Geico drivers will see an annual premium increase of $125. Farm drivers will pay $98 more per year, and those insured by Allstate will see an annual increase of $167.
The state Department of Insurance does not release a public statement when it has approved rate increases. Most motorists will be notified of the new premiums when their bills arrive in the mail.
The new round of hikes will place an additional burden on California consumers who already face high interest rates and other inflationary pressures that have made credit card spending more expensive, especially as more and more people depend on it for their daily purchases. Bankrate recently said the average credit card interest rate had climbed to 20.05%, the highest since Bankrate started tracking rates in the mid-1980s.
Roy Persinko, a 22-year-old Southern California construction contractor, probably knows more than anyone about the effects of all these cost increases.
“Everything about my business has gone up,” Persinko said. “But the cost of auto repair has gone up. Flights are on the rise. Am I happy with what I’m paying for car insurance? No, but that’s understandable.
California waited longer than any other state to raise auto premiums after the pandemic subsided, said Denni Ritter, vice president of the American Property Casualty Insurance Assn. When they get back on the roads, California drivers are driving faster and increasingly drunk, Ritter said, resulting in more serious crash injuries and they wreck cars with higher repair costs. higher than in the past.
“These are skyrocketing costs in the car insurance business,” Ritter said.
Consumer Watchdog said insurers’ claims that they suffered because they weren’t allowed to raise premiums fast enough are exaggerated and misleading. Additionally, rising premium costs will not be shared equally among motorists and will fall unfairly more on low-income workers who will pay up to 25% more than college-educated professionals at some insurers, including Geico. , the group said.
Harvey Rosenfield, author of Proposition 103 and founder of Consumer Watchdog, said rate increases are approved when insurers “have not paid their customers for the exceptional extra costs during the pandemic lockdown, when people have significantly reduced their driving and accidents and insurance claims have dropped.” Consumer Watchdog estimated motorists owed billions.
Sanchez responded that Lara is “using every tool available to ensure consumers don’t pay more than they should.”