According to AM Best data, direct premiums collected for all personal auto insurance in California increased 11.6% to $36.49 billion in 2023.

This makes California the largest U.S. market for this line of business, accounting for 11.5% of total direct premiums (DPW) written in the U.S. last year.

In 2023, 44 groups and independents writing direct premiums of $1 million or more in California reported a combined loss ratio of 100 or higher for all private passenger automobiles. The combined loss ratio for private passenger automobiles in California reached 109.98 in 2023, surpassing the U.S. total of 100.35.

While the national average improved by nearly six points, California's combined loss ratio worsened by over 1.5 points from 2022 to 2023. The state's combined loss ratio had exceeded 100 only once since 2013, at 103.43 in 2016.

According to Bob Passmore, vice president of personal lines at the American Property Casualty Insurance Association, personal auto insurance claims have risen nationwide in recent years due to a variety of factors, with insurers in some states adapting more quickly than others.

“Insurers were paying out more on claims than they were collecting in premiums,” he said. Passmore attributed this to the increased severity of claims due to higher speeds on the roads during the COVID-19 pandemic, as well as higher repair and replacement costs due to supply chain issues and increased labor and parts costs.

Companies like Allstate have cited rising medical costs and higher legal expenses due to increased use of attorneys for personal auto claims. Passmore also noted that modern vehicles, which are essentially “computers on wheels,” make repairs more difficult and lengthy.

Even electronic components that are not directly affected in an accident can be damaged during repairs, causing higher costs for car insurers.

Nationally, insurers are achieving the necessary rate increases, but California presents a different challenge. The state has a rigorous regulatory review process and has not approved any increases in auto insurance premiums for more than two years after Insurance Commissioner Lara Ricardo questioned auto profits at the start of the pandemic.

In 2020, the combined loss ratio for private passenger cars improved to 82.51, the lowest level in a decade, but has increased significantly since then.

Passmore said the reforms by Commissioner Ricardo's department and Governor Gavin Newsom are aimed at making the interest rate process more predictable.

“Interest rate requests cannot remain in limbo for more than a year while inflation drives up costs,” he said.

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