Why Auto Insurance Rates Will Rise Sharply In 2023

Why Auto Insurance Rates Will Rise Sharply In 2023

| December 13, 2022

Auto insurance rates will rise sharply in 2023. Why is this happening?

During the COVID lockdowns in 2020, the California Department of Insurance (DOI) strongly encouraged auto insurance carriers to give rebates and/or to allow lower annual mileage, both of which resulted in lower costs for consumers, and most insurers complied.  Since then, most consumers have been driving more again, and auto carriers haven't yet caught up. Many auto policies are rated incorrectly for annual mileage, and policy rates have generally been artificially low, even though their annual mileage has increased. 

Add to that an unprecedented combination of factors, all happening at the same time -  high inflation, higher frequency and severity of accidents even higher than pre-COVID levels, supply chain issues, and increased labor costs - creating higher costs to the carriers.  Carriers are trying to catch up to the correct ratings, but the DOI, which regulates and approves those rates has a slow moving bureaucracy, so most of these rate increases that needed to happen in 2021 will not be reviewed and approved until 2023.  Because they are so far behind, I anticipate a second rate increase request shortly after the first one is approved, which means a double-whammy, two rate increases in one year.  In my opinion, the DOI is not benefiting the consumer by delaying the inevitable, justifiable rate increases by the auto insurers of California.

To sum up, auto insurers are still using 2020 or 2021 approved rates in 2022, while they wait for their requested rate changes to offset inflation and other issues that have increased their costs.  It's certainly not ideal that you will experience a double dose of increased rates in 2023.  What can you do? Double check that you are receiving every discount available, and that the coverages you have make sense for your situation.  Contact us if you'd like a review of your current policy.