Insurers View New Car Sales Rise in California as More Evidence for Rate Filings

New figures show car sales in California continue to slowly return to pre-pandemic levels, which the state’s auto insurers believe is another indication the state’s insurance regulator needs to approve more rate filings.

The California New Car Dealers Association last month released its 2022 California Auto Outlook report for the fourth quarter, which covers 2022 vehicle registration data and gives a projection for 2023 sales.

Sales were still down last year from figures before the pandemic, but the report shows a gradual increase in sales in 2022 culminating in a 13.6% increase in new light vehicle registrations versus the same period in 2021. This rise occurred despite persistent supply chain issues forcing continued vehicle production cutbacks.

The association’s report echoes data auto insurance carriers have been reporting to the California Department of Insurance as drivers returned to the road following COVID lockdowns, with reported spikes in crashes, fatalities and claims.

Inflation and supply-chain pressures are compounding the increase in claims by driving up repair and replacement costs for damaged vehicles, according to the American Property Casualty Insurance Association.

APCIA has railed against California Insurance Commissioner Ricardo Lara for declining to approve rate filings for two years. Instead, Lara fought to compensate consumers he says were overcharged as traffic virtually disappeared when the state imposed the nation’s first stay-home order.

Lara seems to have recently eased off his rate approval moratorium. APCIA said it has seen the CDI has once again begin reviewing rate filings, with a few recently issued rate increases.

However, the group is pushing for the CDI to make more rate approvals because insurers are paying more in claims than they are getting in premium, according to the group.

It’s part of a nationwide trend that occurred during the pandemic. U.S. private passenger auto insurance losses spiked 25% from 2020 to 2021, while premiums increased 4.6%, an APCIA assessment of NAIC annual statement data showed.

Auto repair and maintenance outlays increased at double the rate of overall inflation, growing 13% compared with 6.5% in December 2022, according to Bureau of Labor Statistics’ data compiled by APCIA.

The group said dozens of rate filings with the CDI are still sitting unreviewed.

The CDI said that in 2022 there were seven total rate filings approved. There have been six approvals in 2023, and there are currently 75 rate filings under review.

A statement from the CDI notes the department continues to follow Proposition 103 guidelines, the state’s primary insurance law which is designed to protect consumers and limit the way rates are determined.

“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,” the statement reads. “Our staff continues to review pending auto insurance rate filings with a goal of giving consumers the best value, the most choices, and to make it right for consumers who were and continue to overcharged on premiums during the pandemic.”

Car sales are expected to continue to pick back up. The California New Car Dealers Association forecast for 2023 calls for new vehicle registrations to rise 5.5% to nearly 1.76 million. According to the association, pent-up demand and low inventory since the pandemic resulted in 43% of sales being delayed.

The demand combined with prices falling to match supply levels is expected to result in increased registrations for 2023. That increase, however, is expected to be dampened by inflation, lingering supply chain issues, and increasing interest rates, the report shows.

Toyota was the top seller in California in 2022 with a market share of 17.3%, followed by Tesla (11.2%), Ford (8.4%), Honda (7.9%) and Chevrolet (6.8 percent), the association’s report shows.

Topics California Carriers Trends Auto Pricing Trends