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California drivers can maneuver around rising car insurance rates by being smart consumers, industry observers say

Bob Passmore of the American Property Casualty Insurance Association said rising auto insurance premiums are taking a bigger bite out of low-income residents’ incomes. | Automotive Body Parts Association

California auto insurance rates rose 7% last year, with low-income residents facing the steepest financial hits, but drivers themselves can take some steps to reduce cost, industry observers say.

In a state with demanding insurance regulations and a challenging legal climate, insurers are now paying out $1.12 for every dollar they take in and coping with inflationary pressures on the cost of new and used cars and repair services, according to Bob Passmore, assistant vice president of personal lines policy for the American Property Casualty Insurance Association.

One factor pushing up auto insurance repairs is the rising cost of auto repairs, Passmore told the Northern California Record. For example, windshield repairs used to involve mainly glass and rubber, but now they require recalibration to ensure auto safety equipment is working accurately, he said.

“Your car is more and more like a rolling computer,” Passmore said.

Bankrate.com reported that the average annual car insurance premium in California is $2,697, the 27th highest rate nationwide based on the percentage of a driver’s income spent on auto insurance (2.95%). And the insurance-comparison website The Zebra reports that the cost of car insurance in California revved up 7% last year.

According to Passmore, in California and in other states, the litigation environment can have an impact on rising rates due to the costs of resolving litigated claims as well as legal defense costs. In addition, the barrage of legal billboard and television advertising tends to encourage people to sue their insurers even though the company may be working with the policyholders to resolve claims.

“If you have a lot of attorney-represented cases, that’s going to have an impact,” said Passmore.

Other societal issues are putting upward pressures on auto insurance in California, he said. In the aftermath of the COVID-19 pandemic, when people temporarily stayed off the roads, more distracted driving, more people looking at their cell phones while driving, more traffic fatalities and an increase in speeding have all combined to spike insurance company costs, according to Passmore.

Meanwhile, the state’s Department of Insurance recently took 30 months to approve an auto insurance rate increase— the type of delay that critics say causes insurers to become unable to keep up with continuing losses. 

“That has not been the case anywhere else,” said Passmore.

But he added that drivers themselves can take steps to ensure they’re getting the best insurance rate possible. Shop around for a different company using a phone or computer, consider not paying for comprehensive coverage if you have an older car, consider a lower deductible and don’t drive while distracted, Passmore suggested.

“Eating and drinking in the car, shaving, putting on makeup— that’s the kind of behavior that really needs to stop,” he said.

Passmore added that it’s unfortunate California bars the use of telematics systems, which can provide real-time feedback to drivers and come in the form of a cell phone app. Insurers have used such technology to promote safe driving and provide customers with policy discounts, he said. 

Several large insurers, including Allstate, have also stopped writing new property insurance policies in California pending changes in the regulatory system to better align the insurer costs and claims payouts.

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