The Consumer Federation of America published a study in November 2013 that showed that the average annual expenditure on auto insurance across the country went up by 43.3 percent between 1989 and 2010. In the same 21-year span, auto insurance expenditure in the state of California went down by 0.3%. California is unique in this regard as no other state in the entire country has been able to keep insurance rates from rising, let alone reducing them.
As per the study, the primary reason for California’s success is strong regulation that has been put in place to keep insurance costs in check. For instance, California has put in place a Prior Approval system which compels insurers to file rate changes and have them approved by the state before they can be implemented in the marketplace.
One of the features of the insurance regulation in California is the control over the criteria that determines premium rate in each particular case. When a person applies for an auto insurance policy, insurers are compelled to give more weight to their previous driving record, miles driven and years of driving experience (in that order) over other factors such as ZIP code or traffic density. This ensures that good drivers are able to get low premium rates even if they live in an area where insurance premium averages are higher. This feature has empowered drivers who have a good driving record and have proved themselves as responsible drivers.
In 1989, it cost more, on average $747.97, to buy auto insurance in California than it was across the country where the average was $551.95. The tables had turned by 2010 when California’s average stood at $745.74 (roughly the same as 1989) and the nationwide average had risen to $791.22. It now costs less, on average, to buy auto insurance in California compared to the nationwide average. California went from being the 3rd most expensive state in which to buy auto insurance, to being the 21st most expensive. The auto insurance regulations in California serve as an example for the rest of the country.
Accidents are one of the major factors that drive up auto insurance rates. While inflated insurance rates due to drunk driving are a preventable auto insurance expenditure, accidents are inevitable and cannot be foreseen. Minor accidents that were not caused by you also affect your insurance rates. Any accident in the past three years on your record is known to increase your insurance premium.
California is one of the most expensive states to buy auto insurance. With an annual average insurance rate of $1819, California is the 6th most expensive state, after Louisiana ($2699), Michigan ($2520), Georgia ($2155), ($2074), Oklahoma ($2074), and Montana ($1894). Auto insurance rates range from $1316 (average insurance rate in Orange County) to $2195 (average insurance rate in Los Angeles) in California.
The table below shows the impact of accidents on average insurance rates.
||Average Annual Insurance Rate ($)
||Average Insurance Rate after one accident ($)
||Average Insurance Rate after two accidents ($)
If you have been involved in an accident that caused major property damage or serious injuries, it is likely that your insurance rates will be increased to an amount between $3293 and $4390 in Los Angeles. In addition to these increases, most auto insurance companies follow the Insurance Services Office’s (ISO) surcharge policy. According to this policy, insurance rates are likely to increase to $2183 for a multi-car policy, and to $2547 for a single-car policy.
As of December 2013, the average annual auto insurance premium rate in California is $1819. Before 1988, the auto insurance premiums were high, as there were no state regulations on the insurance industry. As a result, California auto insurance rates kept climbing to unaffordable levels. To combat what many saw as arbitrary insurance rates, Californians voted into law Prop 103 on November 8, 1988, which called for consumer-driven regulation on insurance companies.
Auto insurance is mandatory in California. The state of California has a zero tolerance policy on uninsured driving. If a person is caught driving without insurance, he will be penalized. The fine for first-time offenders is $250. Drivers could also lose their license, and have their car registration suspended.
California has one of the highest accident rates in the country, surpassed only by Texas. According to the U.S. Department of Transportation, National Highway Traffic Safety Administration (NHTSA), thetotal fatalities due to road accidents in California were 2816 in 2011 and 2857 in 2012, of which alcohol impaired fatalities were 774 in 2011. Alcohol-impaired fatalities contributed to 27% of the total accidents in 2011 and 28% in 2012.
California has a law that prohibits a person from driving when they have a blood alcohol concentration (BAC) of .08 percent or more in their system. If you are caught violating this law, the penalties you face are very stringent. First-time offenders pay a fine up to $1000, which could be raised for repeat offenders. You could also face jail time of 6 months for your first conviction, and 1 year for subsequent offences.
One of the major financial implications of drunk driving is the increase in auto insurance premiums. In the first year of DUI, the premium rates go up to $ 3383. This can go further up in some cases for the next seven years after conviction. However, you could reduce your premium to $2876 by taking a defensive driving course.
If you're involved in an accident that causes serious injuries or major property damage, your insurance premiums could increase between $2729 and $3698 after your next policy renewal.
In California, average insurance rates differ from zip code to zip code. Orange County is the least expensive zip code, while Los Angeles is the most expensive. This means that alcohol related offenses in Los Angeles will hike up your premium to $4086 the first time you are caught.