How California’s Auto Insurance Market Fell Into Crisis—And What’s Being Done To Fix It

For years, auto insurance in California was relatively stable—competitive rates, plenty of insurers, and policies that were easy to obtain. That’s no longer the case.

Today, drivers are facing skyrocketing premiums, policy non-renewals, and fewer companies willing to issue new policies. Some insurers have stopped writing auto coverage in California altogether, while others have tightened their underwriting requirements, making it harder for drivers to get insured.

At the same time, California’s homeowners insurance market is also in crisis, with drivers experiencing similar issues—rising premiums, fewer carriers, and stricter underwriting. While these two crises share some common causes, including outdated regulations and rising claims costs, they also have distinct challenges.

For auto insurance, the biggest issues aren’t wildfires or property damage—it’s the rising cost of repairs, liability claims, and increased legal settlements that are making auto insurance unsustainable in California.

Why California’s Auto Insurance Market Is Unraveling
Inflation has played a role in rising costs, but it’s not the root of the problem. The real issue is that California’s insurance regulations prevent insurers from adjusting to today’s risks.

At the same time, liability claims and lawsuits have exploded, and fraud continues to be a major issue. Insurers aren’t just losing money—they’re pulling back from the state to avoid further financial strain.

Here’s what’s happening—and why it’s harder than ever to get affordable auto insurance in California.

Soaring Auto Repair Costs Are Driving Up Insurance Claims
Cars have become more advanced and safer, but that technology comes at a price. What used to be a simple, inexpensive repair is now a high-tech process requiring specialized labor and costly parts.

• Bumpers now house sensors and radar for collision avoidance systems. A minor bumper replacement that once cost $500 can now exceed $3,000–$5,000 due to built-in safety features.
  
  
• Windshields aren’t just glass anymore. Many contain heads-up displays, rain sensors, and lane departure cameras. Replacing a windshield can now cost $1,500 or more, plus recalibration fees.
  
  
• Even side mirrors are expensive. With blind-spot monitoring, cameras, and heating elements, what was once a $150 part is now a $1,000+ repair.

Adding to the problem is a shortage of skilled technicians and rising labor costs. Modern vehicle repairs often require specialists trained in electronics, programming, and recalibration. As a result, insurers are paying far more per claim than they used to.

The Explosion of Injury Claims and Massive Jury Awards
While rising repair costs are a challenge, the real financial threat to auto insurers isn’t fixing cars—it’s the skyrocketing cost of liability claims.

• Injury claims are becoming more severe. In the past, most accidents resulted in soft tissue injuries like whiplash. Now, traumatic brain injuries (TBI) and spinal injuries are far more common in claims—and far more expensive to settle.
  
  
• Lawsuits are getting bigger, and settlements are reaching record highs. Personal injury lawyers are pushing more cases into litigation rather than settling early, increasing legal fees and claim payouts.
  
  
• Juries are awarding massive sums. Known as nuclear verdicts, these are jury awards in the tens or even hundreds of millions of dollars.

Recent Examples:
- A $50 million jury award in a California pedestrian injury case.
- A $100+ million trucking accident settlement.

Insurers must reserve more money for lawsuits, which drives up costs. Reinsurance costs are rising, which gets passed down to policyholders. Some insurance companies are leaving the state rather than deal with unpredictable payouts.

Personal Injury Lawyers Are Driving Up Claims—And They're Everywhere
It’s no longer just a handful of lawyers advertising on billboards. In California, personal injury law firms are now major sponsors of local professional sports teams.

• They’re on TV, radio, social media, and buses, encouraging drivers to file lawsuits after even minor accidents.
  
  
• With huge ad budgets, firms are getting more cases and pushing them into litigation instead of quick settlements, driving up claim costs.
  
  
• Third-party lawsuit financing companies allow plaintiffs to hold out for bigger payouts, knowing insurers may settle rather than risk a jury trial.

More lawsuits and larger settlements mean higher insurance costs for everyone. Insurers are paying out more per claim than ever before, and higher premiums are necessary to offset the rise in litigation.

Insurers Are Cracking Down on Fraud & Tightening Underwriting
With fraud and misrepresentation on the rise, insurers are no longer issuing policies as easily as they once did.

• Waiting periods for new policies. Many insurers no longer allow same-day coverage, requiring a waiting period before issuing a policy. This helps filter out higher-risk drivers.
  
  
• Vehicle inspections and photo verification. Some insurers now require in-person vehicle inspections before issuing coverage. Others demand photo documentation to verify a car’s condition and prevent fraudulent claims for pre-existing damage.
  
  
• Odometer verification & registration checks. Self-reported mileage has long been an issue, with many drivers underreporting miles to lower premiums. Insurers now require odometer photos and cross-check vehicle registrations to ensure policies reflect actual vehicle usage and garaging locations.

Fewer easy approval policies, more documentation required to get coverage, and insurers filtering out high-risk applicants are making it harder to secure a policy.

How to Fix California’s Auto Insurance Market
The current system is unsustainable. Here’s what needs to happen:
✅ Allow insurers to adjust rates in real-time to reflect rising claims costs.
✅ Curb excessive injury claim payouts to reduce nuclear verdicts.
✅ Crack down on lawsuit abuse to prevent frivolous litigation.
✅ Require mileage verification to ensure pricing is based on real data, not self-reported estimates.
✅ Encourage more insurers to enter the market to increase competition and lower prices.

Final Thoughts: What This Means for Drivers
Until meaningful reforms take place, drivers should:
✔️ Make sure they have Uninsured Motorist (UM/UIM) coverage. More drivers are going uninsured due to rising premiums, making this protection critical.
✔️ Consider higher liability limits and a personal umbrella policy. With nuclear verdicts on the rise, state minimum coverage may not be enough.
✔️ Work with an experienced agent to find the best coverage in a shrinking market.

California’s auto insurance market is in crisis—and without regulatory change, the problem will only get worse.

At Schneiderman Insurance Agency, we do our best to make sure that our clients are well-protected with affordable and comprehensive policies. To learn more about how we can help you, please contact our agency at (818) 322-4744 or Click Here to request a free quote.

Disclaimer: The information presented in this blog is intended for informational purposes only and should not be considered as professional advice. It is crucial to consult with a qualified insurance agent or professional for personalized advice tailored to your specific circumstances. They can provide expert guidance and help you make informed decisions regarding your insurance needs.​