Tag Archive for: prop 103

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auto insurance – the EPIC payouts are costing YOU

As the world starts to return to normal following the pandemic, auto insurers are facing a tough road ahead. With people staying home and working remotely, there were far fewer miles driven during the pandemic. This led to a drop in auto losses and insurance payouts.


Now that things are beginning to open back up, people are starting to drive more again. However, due to Proposition 103, which bases auto premiums on mileage-driven, insurers will be struggling to keep up with demand. So while the post-pandemic landscape may look promising for some industries, auto insurers unfortunately have a long road ahead.


In this blog post, we will discuss what’s happening in the auto insurance industry and how it may financially impact both the insurer and the insured. 

the current state of auto insurance

Carriers are now struggling to catch up with insureds and get adequate rates in light of increased exposure. Other factors such as supply chain issues, labor shortages, and increased wages have caused claim costs to rise, while vehicle repair times have more than doubled. As a result, both new and used vehicle prices are at all-time highs, resulting in increased costs when vehicles are totaled in an accident.

what does this all mean?

This means that auto insurance carriers will have to find ways to cut costs and increase efficiency in order to stay afloat. One way they may do this is by increasing the use of technology, such as telematics, to help them better assess risk. They may also move towards a more pay-as-you-go model, where customers are only charged for the amount of coverage they actually use. Whatever changes auto insurers make in the post-pandemic landscape, one thing is for sure: they will need to be adaptable and agile in order to survive.

how are auto insurers coping?

Auto insurance companies have requested 15-20% rate increases in order to maintain profitability, but the Department of Insurance has refused to grant these requests. As a result, many carriers are struggling to keep up with rising costs. Some carriers have been told by the DOI not to bother filing for any rate increases, as they are unlikely to be approved. This lack of approval has been going on for two years now. Consequently, auto insurance rates have remained stagnant during this time period.

what does this mean for consumers? 

These changes mean that auto insurance rates are likely to remain unchanged in the near future. And right now, premiums are at an all-time high. This is good news for those who are already struggling to pay their premiums. However, it also means that insurers will continue to struggle to pay claims, which could lead to longer wait times for repairs and other services.


Auto insurance companies are struggling right now because they are having to pay out more money in claims than they are bringing in through premiums. This is especially true for policies that were written recently since insurers didn’t collect the full premium upfront. To try to fix this, some auto insurers have stopped writing new policies altogether, at least through independent agents.

the issues at hand 

This is a problem because people who need auto insurance still need to be able to get it. Hopefully, this will all be sorted out soon so that everyone who needs auto insurance can get it again without any trouble.


One carrier shared that the loss ratios on first-year written policies, starting with policies written in the month of January through the month of June, were 121% 128% 120% 128% 115% 118%. This means that for every dollar that was collected in premiums, the insurance company had to pay out $121-$128 in claims. So they are losing money on these policies. 


The auto insurers are facing higher payouts, and they will need to recoup those losses somehow. And that means that these huge payouts are costing consumers in the long run. Premiums are likely to stay high to compensate for the increased payouts. At the same time, insurers are taking much longer to issue these payouts while they adjust to post-pandemic challenges. 

the future of auto insurance

First-year auto insurance policies always run a higher loss ratio because the premium is not collected upfront. That is why we’ve seen so many carriers require payment in full on new policies.


Some insurers have tried to fix this problem by requiring that people pay the full premium upfront when they get a new policy. But this was rejected last week by the DOI (Department of Insurance).


Some auto insurance carriers are trying to make it harder to write new business by only allowing quotes and new policies to be written on their own websites. This is because they want people to buy less auto insurance, or stop buying it altogether. 

final thoughts

During the pandemic, people drove less because they were staying home. This meant that there were fewer accidents and insurance companies had to pay out less money. Now that the pandemic is mostly over, people are driving more and insurance companies are having to pay out more money again. Insurance companies are also having to pay more for repairs because it’s taking longer to get parts and labor is more expensive. So all of this together means that auto insurance rates will likely stay high.


Despite these challenges, auto insurers are still committed to providing coverage for their customers. They are working hard to ensure that claims are processed quickly and efficiently and that rates do not increase too much. The pandemic has been a difficult time for everyone, but auto insurers are doing their best to keep the roads safe for all of us.


Reach out to our team if you have any questions or concerns regarding auto insurance. 

why auto insurance premiums are increasing

why auto insurance premiums are increasing

The past year has brought many new challenges to the insurance industry. The consistent rise of auto insurance premiums is impossible to ignore— but why are premiums rising? Let’s discuss.

why are my auto insurance rates rising?

Let’s dive into some reasons why your auto insurance rates might be increasing.

the pandemic

During the COVID-19 pandemic, miles driven fell off a cliff as everyone quarantined and worked from home. Auto losses dropped and loss ratios for most carriers dropped 20-30%.


We all saw clients adjust their annual miles driven since they were not driving to work. For the first time in a long time, the combined ratios dropped below 100.


We are now, mostly, out of the pandemic, and miles driven are back to the pre-pandemic levels. However, carriers are struggling to catch up with insureds to adjust mileage and get adequate rates for exposure.

supply chain issues

Similarly, supply chain disruptions—a result of the COVID-19 pandemic—have caused a slew of issues in the auto industry. How?


The COVID-19 pandemic exposed any weak links or inefficient areas in supply chains by creating a series of issues that trickled down the chain. Lockdowns and illnesses kept workers out of the workplace, resulting in a labor shortage and a consequent shortage of materials.


As a result of these issues, freight costs increased, shipments were delayed, and the costs of goods spiked.

what do these supply chain issues mean for the automotive industry?

Again, these supply chain issues caused a ripple effect within the automotive industry: Getting parts to repair or create new cars is more difficult than pre-pandemic, materials are more expensive, and labor costs have increased.


This means car repairs are taking longer and costing more than before. Further, the costs of rental vehicles have increased due to high demand.


The effects of these delays have affected the automotive insurance industry by driving up premiums. Insurance companies are not necessarily profiting from these increases but are instead raising their rates about 15 to 20% to cover the inflated costs of repairs to the vehicles.

distractions behind the wheel

The rise of technology brings a plethora of pros and cons to the insurance field. As reported by The Centers for Disease Control and Prevention (CDC), there are eight deaths a day due to distracted drivers.

They list the three main types of distraction as:

  • Visual: Taking your eyes off the road
  • Manual: Taking your hands off the wheel, and
  • Cognitive: Taking your mind off of driving

The statistics have shown that distracted driving has increased with the influx of devices to be distracted by (consider the 17-inch screen that is now installed in Teslas).

The rise in distractions creates a greater financial risk for insurance companies, hence the rise in auto insurance premiums. Some insurance companies even have a “Distracted Driver Policy” because it has become so common.

The National Safety Council provides a PDF with a sample of a Distracted Driver Policy for reference.

drivers with little experience

The hiring market is unpredictable right now. According to The American Trucking Association, “without substantial action, by 2030 and at current trends, the driver shortage could grow to 160,000.”

What does this mean? Well, nearly “one million new drivers will need to be trained and hired in the next decade to keep pace with increasing consumer demand and an aging workforce.”

With the lack of drivers, there is a sense of desperation to find anyone to help transport supplies. In turn, this has resulted in a higher risk of accidents because of less experienced drivers handling large machinery and vehicles, and you guessed it, increased auto insurance premiums as a result.

repair costs

Vehicle repair time, due to the pandemic, has doubled or tripled—which increases the cost of rental cars. Moreover, both new and used vehicle prices are at all-time highs, which increases claim costs when vehicles are totaled in accidents.

Insurance aside, most vehicles have become more expensive to maintain because inflation has affected many sectors in the auto industry. 

This is partially due to the rise in smart cars that are equipped with special technology and advanced parts that are expensive to replace and repair. The combination of technological advancements and the stress on chain distributors over the past year has created the perfect storm.

As a result, more control is given to car shops and manufacturers to raise prices on parts and labor. This includes a higher premium and insurance needed for more expensive auto installations and parts.

injury costs

The rise in accidents has caused a rise in auto insurance premiums. CNN reports that last year around 38,680 persons died in car accidents – the highest number since 2007.

There are different types of car accidents, and not all of them are chargeable. Forbes lists a “chargeable accident” as a collision that causes damage to property (like another car or a fence) or causes injury or death.

Most reports and claims of a car accident that causes injury increase an insurance premium.

involved attorneys

The rise of claims has created a higher demand for attorneys involved in the vehicle accident sector. With the increase in specific claims, more people have representation.

Has your insurance broker asked for a copy of your contract recently? Don’t worry, they’re not being nosy! Your broker is just going the extra mile to understand the terms and scope of an agreement.

Learn more about why your broker needs a copy of your contract in order to issue a certificate on the benchmark commercial insurance blog.

what does proposition 103 have to do with my auto insurance?

On November 8, 1988, California voters passed Proposition 103. The California Department of Insurance (CDI) was charged with creating new programs and expanding existing operations to meet the mandates of Proposition 103.


But what does this have to do with auto insurance?


Under the rules of Prop 103, California began requiring insurance companies to justify their proposed rate increases and receive approval from the California Insurance Commissioner before passing along to consumers any rate hikes. 


Prop 103 requires that safety record, mileage, and driving experience rating factors have the greatest influence on auto premiums. As people are going back to in-office work and social events in 2022, insureds are increasing their mileage and, effectively, experiencing higher rates.

what’s next? let’s keep the conversation going

What’s next you ask? Our team at benchmark commercial insurance has recently been informed that one of our largest personal auto carriers is contacting all the comparative rating vendors, and removing them from all platforms.


Therefore, the only way to quote and write new business will be directly on their portal.


Why? This is being done to hopefully make it harder to write new business. Moving forward, we may see this from more carriers.


Interested in learning more? Get in touch with our team today, or read on in our articles: