Why Did My California Car Insurance Premium Increase?

If you are like many people in California and across the country, you may have noticed your automobile insurance premiums rising significantly in recent years.  This trend is the result of higher than expected claims over a number of years.  Travelers Insurance, for example, recently announced their intention to hike automobile insurance premiums.  The response from Wall Street?  “What took you so long?”

A decade ago, auto insurance companies paid out about 95 cents for every $1.00 charged in premium revenues – a seemingly small margin made up for in volume.  Recently, however, companies industry-wide have been paying $1.05 in costs for every $1.00 in premiums.  The increase is based on several factors.

Increased Crashes

According to the Center for Disease Control and Prevention (CDC), distracted driving results in 1161 injuries and over 8 deaths per day.  The CDC identifies the three main types of “distracted driving” as the following:

• Visual – taking your eyes off the road;
• Manual – taking your hands off the wheel; and
• Cognitive – taking your mind off your driving.

The CDC reports texting results in a driver taking their attention from the road.  Texting also results in a driver taking their eyes off the road for a longer duration as compared with other types of driver distractions such as eating while driving.  For example, the average text composed and sent while driving 55 mph takes the driver’s eyes off the road long enough to cover the length of an entire football field.

As more and more people have gained access to the technology of texting, accidents caused by distracted driving on California roadways has increased.

Increased Costs of Repair

Another factor driving up the price of automobile insurance is the increased cost to repair vehicles.  Thanks to technology, cars today provide additional features that cost more to repair or replace.  For example, the bumper with embedded sensors and a rear-facing camera was designed with an eye towards reducing accidents when backing up.  However, when a car is hit by another car from behind, the cost to replace the bumper necessarily increases, as the camera and sensors must also be replaced.

Increased Use of the Roadways

Americans’ driving patterns have remained largely stagnant since 2004, but now Americans are driving more than ever before.  With gas prices hovering around $2.00 per gallon, and cars more fuel efficient than ever, many Americans are choosing to drive, rather than fly, to vacation destinations.

What Drivers Can Expect

With the increase in crashes, the increase in costs of repair, and the increase in drivers on the road, drivers can expect their insurance premiums to continue to rise in the near future.

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