This Is Why Your California Auto Insurance Just Got More Expensive

You're not imagining things -- costs are going up. According to the Bureau of Labor Statistics, the average price of car ownership rose from $71.50 to $81.20 per mile from 2022 to 2023.

So, why is car ownership getting more expensive?

Rising car insurance premiums are a big part of the puzzle. I'm looking at you, California. The Golden State has approved so many rate hikes in 2023 and 2024 that auto insurer State Farm published an article titled "Why Are Rate Hikes Going Up?"

Why, indeed. It boils down to a battle between insurers and California insurance authorities, mixed in with a heaping helping of inflation. Your premiums are going up, and here's the scoop.

Insurers and California officials duked it out

In late 2022, the California Insurance Commissioner began lifting restrictions on rate hikes. Prior to this, the commissioner had prevented auto insurers from raising rates. The upside was lower rates for Californians. The downside: insurers have been threatening to pull out of California.

The result is what we have today: huge rate hikes.

Rate hikes have exploded onto the scene like cola from a shaken soda can. In November and December of 2023, CA approved double-digit rate hikes for insurers Geico (12.8%), State Farm (21%), and Allstate (30%), according to Consumer Watchdog.

These rate hikes came into effect as of February and April 2024.

Why the commissioner kept rates artificially low: rate hikes are expensive for Californians, and insurers sometimes charge too much. That's the theory, anyway. Car insurers say they've been forced to eat inflation costs, and they've been losing money.

There is some truth to both sides. Just know that it's not your fault your insurance is going up.

What if the commissioner never approved rate hikes?

In short, it depends on how desperate auto insurers are to hike rates. On one hand, California has a lot of people who buy car insurance along with other policies. Auto insurers often insure homes, which they bundle with auto insurance.

On the other hand, insurers don't like losing money because they can't hike rates. Allstate stopped selling new auto policies to Californians in 2022; it restarted only when officials agreed to begin hiking rates. When insurers pull out of the state, Californians have fewer options.

If the commissioner hadn't approved rate hikes, we might have cheaper rates and fewer options. At some point, California had to allow price increases; otherwise, insurers would pull out of the state one by one, leaving us with nothing. The only question was when.

Pricier premiums are the new normal

Expect your premiums to remain higher than they were before. Unless deflation hits or owning a car somehow becomes drastically less expensive, insurers are unlikely to lower rates. They've spent years pushing for hikes; they probably won't want to give up recent gains.

If your insurance is too expensive, you can totally look into switching insurers. Price hikes aside, some car insurers are simply cheaper than others. Geico has great rates, generally speaking. State Farm often comes in close second, especially for drivers with a history of accidents.

Generally, insurance is pricey right now, but yours doesn't have to be. The best car insurers in California are those that combine low prices with high standards of service. Shop around to get the best rates -- your wallet will thank you for your service.