Since the beginning of 2023, several major insurance companies have announced that they would stop writing policies or drastically reducing offerings in two of the three most populous states in the U.S. Industry heavyweights such as Geico, Progressive, and Farmers have started leaving the California and Florida auto insurance markets, citing rising coverage costs and other changing market factors as the reasons for doing so.
and Geico had closed its California offices. The article quoted an insurance broker who said that State Farm was only offering quotes in person, and not over the phone.that Farmers Insurance was going to stop offering auto coverage and other insurance policies in the state of Florida. The company only accounts for 2% of the total Florida auto insurance market, and it said that it would continue to offer policies through subsidiaries such as Bristol West and Foremost Signature.
However, the cause of these price increases is more complex. Several factors have contributed to rapid growth in the cost of paying out insurance claims.One of the major drivers in the increase in claims costs is that car accidents have become more frequent and more severe in the last few years. According to the, 2021 marked the second year in a row that motor vehicle deaths increased. The U.S. saw an 11% increase in traffic fatalities in 2021 after an 8.3% increase in 2020.
, auto insurance companies have had to pay out much more for totaled vehicles – in many cases, for vehicles with premiums based on cars valued lower at the start of the policy than when the claim was made.Climate change has also changed the math for insurers. Events such as wildfires in California and hurricanes and floods in Florida have increased the number and severity of claims in the states.
A spokesperson for the California Department of Insurance offered reporters a different perspective, saying,"while insurance companies are focused on increasing rates, the Department of Insurance is focused on protecting drivers and helping them get the most value from the premiums they pay.
In Florida, the state legislature was already in the process of passing legislation to try to stabilize the insurance market. Part of that legislation has been directed at curbing a wave of lawsuits against insurers in what the insurance industry views as abuses of the legal system. Florida officials have said that legislative action also works to protect insurance customers.