Getting car insurance gets harder: California drivers face delays, higher rates

By Levi Sumagaysay, CalMatters

If you’re having trouble finding affordable car insurance, you’re not alone. Drivers across California say they’re having to wait longer than usual to get coverage — and when they finally find an insurer and a plan, they’re having to pay their premiums up front.

“Something is definitely not right,” said Willis Lai, a 36-year-old driver from the Bay Area who said it took him three weeks to find insurance for his new Honda Accord hybrid after he contacted all the major insurance providers whose jingles he could remember.

He’s not the only one. For the past year, drivers have been complaining in online forums such as Reddit and Facebook about higher premiums, delayed quotes, questionable insurer behavior and more. The California Department of Insurance is looking into similar complaints. Meanwhile, insurers have complained that their costs are rising, and that the state has been slow to approve their requests to raise their rates partly because of what they say are California’s cumbersome regulations.

“All auto insurance companies admitted in this state are required to write all ‘good drivers,’ and we are currently investigating these issues to determine whether or not the alleged actions are in compliance with insurance law,” said Michael Soller, deputy insurance commissioner and spokesperson for the state’s insurance department.

The insurance department also is in the middle of setting new regulations for fire insurance as some of the biggest insurers have pulled out of California, citing increased wildfire risks. That has led to skyrocketing premiums that some homeowners have said they can’t afford, and Gov. Gavin Newsom issued an executive order in September directing the insurance commissioner, Ricardo Lara, to try to solve the problem.

In California, drivers who have had a license for the past three years and have not had more than one point on their record within that period are considered good drivers. California is one of only four states that requires insurers to sell insurance to good drivers, and is the only state that requires insurers to offer good drivers a 20% discount. It is also the only state that mandates that insurance premiums must be based on three factors: a driver’s record, experience and miles driven annually.

Yet insurance premiums vary widely depending on many factors, including different coverage levels, what type of vehicle, where the driver lives and more. For example, a single driver with four years or less of driving experience could pay anywhere from $2,000 to almost $20,000 a year, according to the comparison tool on the insurance department’s website. Considering his age and good driving record, Lai expected to find a policy that would’ve worked out to less than $200 a month.

Instead, Lai said he got an online quote from Geico for $750 for six months, but near the end of the process encountered a technical issue on the website and was directed to call an agent. That agent asked him to try again, and the second time around, he received a quote of about $1,000 for six months — which still would have worked out to about what he expected to pay, according to his research.

Lai said he ended up talking to three agents within a couple of hours, and was told he would have to wait 15 days — some insurers have instituted new, varying waiting periods and upfront payment requirements — and be mailed a confirmation. He asked if he could be emailed a confirmation instead but was told the company’s current policy is to use snail mail, even though Geico closed all its offices in California last year and is supposed to be offering policies online.

While he was waiting for Geico, he contacted Wai Cheng Insurance Agency, in Pleasanton, where an agent helped him get approved for coverage through Progressive on the same day.

He eventually received the confirmation from Geico, which asked him to provide copies of a utility bill, his vehicle registration and more. He said he was told that once he produced the required documentation, he would be contacted — again, by mail — to be informed of the next step.

“I think Geico was intentionally slowing down the process,” Lai said. “They made it way too hard to get insurance.”

A Geico spokesperson did not return a request for comment. But in a September letter to a deputy insurance commissioner in response to a consumer advocacy group’s questions about whether Geico has been limiting access to its auto insurance policies in California for the past five years, a company executive denied that the company was doing so.

“GEICO rejects the premise of the question in its entirety,” wrote Russell Ward, senior director of insurance product management for the company, in a letter that was obtained by advocacy group Consumer Watchdog and was seen by

CalMatters. “GEICO, to the best of its knowledge, is in full compliance with all California laws, regulations, and (California Department of Insurance) requirements,” Ward added. Among the specifics he mentioned: “Our website, mobile app, and digital offerings have been available for new business inquiries providing real-time preliminary quotes throughout this time period.”

Another driver, Victor Lopatyuk, said he had a similar experience with Geico as he sought to insure a 250cc dirt bike he had spent a year restoring. “Geico seemed reasonably priced,” said the 21-year-old driver, who lives on the Central Coast. “Then the packet arrived in the mail one hour before the deadline (for) sending back my information.”

Lopatyuk eventually found an agent who referred him to Progressive, but the interaction with the company left him feeling confused, “like they don’t really want me to go with them.” He said Progressive required an upfront payment for the year, and told him “It’s OK if you can’t pay that. We understand if it’s too much.” He paid the premium, which he said is a little less than $2,000 a year for 4,000 miles — more than what about a dozen of his friends who are the same age and driving similar bikes told him they are paying.

Why is this happening?

The rising premiums can be explained: The state insurance department has approved a total of 111 rate increases so far this year, Soller said, with 58 of those from requests filed this year. The department is reviewing 80 more such requests filed this year, he said, adding that there are more than 130 companies that offer auto insurance in California.

Data from the insurance department shows rate hikes ranging from 4% to double-digit percentages, with the highest auto premiums approved so far being a 62% increase from online car-insurance company Root Insurance, and a 65% increase for motorcycle insurance from Geico.  The approved rate increases so far have averaged 13.2%, compared with an average of 10.6% in 2019, before the pandemic. In 2018, the average approved rate increase was 6.8%.

After sending $2.5 billion in rebates — at the request of the state insurance department — to some California drivers who were stuck at home because of pandemic lockdowns in 2020, insurers say their rate requests, which most insurers submit every year, are now urgent because people have resumed driving as usual, and costs of claims have risen along with prices of other goods and services. Also, they say the state’s insurance department didn’t approve any increases for more than two years — the department’s records show it approved 15 in 2020 and six in 2022.

So in early 2022, “we met with the department and said let’s talk about inflation, miles driven, loss costs, all of it,” said Denni Ritter, vice president for state government relations for the American Property Casualty Insurance Association, a national trade association for home, auto and business insurers. Ritter also said supply-chain issues during the pandemic that drove up the prices of cars and parts are factors in higher insurance premiums.

Those factors mean rising auto premiums aren’t unique to California. An S&P Global Market Intelligence report found big jumps in auto insurance rates across the nation, with California premiums up 9.7% from 2018 as of August — about in the middle among other states’ premium increases — though that includes the pause in insurance rate hikes in the state because of the pandemic.

What is unique to the state is Proposition 103, which was passed in 1988 and contains a provision that requires hearings for any personal insurance rate increase requests above 7% if a member of the public challenges it. Because of that provision, insurers consider California to be the “worst market,” said Vanessa Wells, an attorney who represents insurance companies and said the hearings can sometimes take a couple of years.

Because asking for a 7% increase comes with the risk of a hearing, “Everybody asks for 6.9%, so then you get behind,” Wells said, adding that she thinks that once insurers’ requested rate increases are approved, insurance availability should improve for California consumers.

“Auto is very illustrative of the regulatory issues in California,” said Ritter of the American Property Casualty Insurance Association.

Hearings over property and casualty rate filings are rare, though. The most recent hearing for auto insurance was last year, and before that it was in 2009, Soller of the insurance department said.

California also has the most drivers out of all the states, with about 27 million licensed drivers in 2021, 9 million more than the next state with the most drivers, which was Texas, according to Statista. So as long as insurers want to do business here, they have to abide by Prop. 103.

The state’s regulations have helped save drivers $2.5 billion since 2002 as Consumer Watchdog has challenged rate increases, according to the advocacy group’s calculations. Insurers and the insurance department often criticize the group over the $11.5 million it has received over those years as an intervenor in auto and other insurance rate-increase proposals, but Consumer Watchdog Executive Director Carmen Balber said most of that money goes to attorneys and experts who help the group do its work.

“(Insurers) do not like the rules,” Balber said, adding that insurers seem to be using this moment to justify their anti-regulation stance. “We have a combination of inflation and climate change that the industry is really leveraging as an opportunity to claim it’s regulation that’s holding them back.”

Additionally, a Consumer Federation of America study published in 2019, which was based on data from insurance commissioners around the nation, found that in California and other states that must approve rate increases by insurers, drivers’ insurance premiums have not risen as much as in other states. From 1989 to 2015, the period covered by the study, Californians saw the smallest rate increases, 12.5%, compared with a national average of 61%.

Like other industries, insurers try to influence policy. State records show the industry has increased its spending on lobbying after major catastrophic events, such as after destructive and deadly wildfires in the state in 2000, 2005, 2013, 2017 and 2018, and after the onset of the COVID-19 pandemic in 2020. In 2021, the industry’s lobbying rose to $9.2 million, up almost $2 million from the year before and the highest amount going back two decades.

Meanwhile, the department of insurance, the insurance industry, consumer advocates and the drivers who spoke with CalMatters agreed on one thing: It may be harder to find affordable auto insurance right now, but drivers still have options. The auto-insurance marketplace in the state is not the same as the homeowner- and fire-insurance marketplace, and with a couple of exceptions, auto insurers are not leaving the state. For example, some Farmers auto insurance customers recently received notices of non-renewal, but that applies to just one of its brands. Those customers are being steered to other Farmers brands.

“We urge consumers to contact us,” said Soller, of the insurance department. “Are there companies who can get them a better price? Or are there issues that we should look into?”

Soller also said some drivers should check whether they qualify for the state’s low-cost auto insurance program, which has some income-eligibility and other requirements and can offer premiums ranging from about $200 to less than $1,000 a year.

Balber of Consumer Watchdog said it may be “shocking not to be able to get insurance online,” especially for young drivers who may be trying to get insurance on their own for the first time and then believe they’re running into an “antiquated” system. “This may not be a comforting answer, but there are many insurance companies in California.”