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Industry Updates
California Regulator Puts Auto Insurance Rate Approvals on Hold

Auto insurers warn consumers will be left without coverage.
  • Renée Kiriluk-Hill
  • September 2022

California Insurance Commissioner Ricardo Lara is pumping the brakes on private passenger auto rate hike requests from carriers, including Geico, which he said overcharged policyholders during COVID-19 pandemic shutdowns, according to spokesperson Gabriel Sanchez.

Insurers facing higher claims costs have sought widespread increases but have faced pushback in California. Rates appear to be stuck in the state, said Kemper President, Chief Executive Officer and Chairman Joseph Lacher Jr., and he thinks the market will seize up in the near future.

“They're going to have a social and cultural problem where they're not going to be able to have people bind or change auto insurance,” Lacher said during a second-quarter earnings call.

For 27 months Lara has “instructed his staff not to open or review rating plans” for private-passenger insurers, American Property Casualty Insurance Association spokeswoman Nicole Mahrt-Ganley said. That has left dozens of filings in limbo as carriers grapple with skyrocketing costs from inflation and more severe auto accidents in California, she said.

“Left to their own devices, insurance companies will charge more, not less,” Sanchez said. “The California Department of Insurance is reviewing data from private passenger auto insurance companies deemed to have the largest gaps between what was owed and has been refunded to determine how best to close the gap on auto-insurance premiums owed to drivers.”

Executives at Allstate and Liberty Mutual named, or alluded to, California and New York recently when speaking about trouble attaining what they said will be rate adequacy as economic and social inflation and other factors, such as changed driving patterns and supply chain issues, escalate claims severity. Absent CDI action on rate requests, auto insurers are “forced to make difficult decisions to manage solvency,” said Mahrt-Ganley. Drivers may soon have difficulty finding coverage, she warned.

In addition to seeking rate hikes, carriers have cut marketing for personal auto and taken other actions, such as requiring full payment at the start of a policy, to offset losses.

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