California automobile insurance policies will require higher liability coverage limits beginning Jan. 1, 2025, as provisions of a 2022 law come into effect. The adjustments mark the first change to the state’s minimum liability limits in over 56 years.
Under the new rules, the minimum limits for bodily injury or death will double. Coverage for injury or death of one person will rise to $30,000, while the limit for injury or death of all persons will increase to $60,000. Property damage coverage will triple to $15,000.
Additional increases are scheduled for 2035, with limits for bodily injury or death of one person set to increase by $20,000 and the aggregate limit by $40,000. Property damage coverage will rise by another $10,000.
The changes aim to provide California drivers with greater financial protection in the face of rising medical and repair costs, according to State Farm Mutual Automobile Insurance Co.
“These adjustments reflect the growing costs of accidents and the need for adequate coverage,” the company said in a report from AM Best.
However, the American Agents Alliance cautioned that the higher limits could lead to increased premiums for drivers who currently carry the minimum coverage. The group expressed concerns that higher premiums might push some drivers, particularly those with lower or fixed incomes, to forgo coverage entirely or rely on the state-sponsored Low-Cost Auto Insurance Program.
Read More: Nonstandard auto insurance rebounds
The alliance also warned that the increased limits could encourage more aggressive litigation, as the higher coverage amounts may provide greater financial incentives for lawsuits. This could, in turn, lead to a rise in litigation rates and associated costs.
California’s five largest writers of private passenger auto insurance in 2023, based on direct premiums written, were State Farm Group with 12.87% market share, Auto Club Enterprises Insurance Group at 11.55%, Berkshire Hathaway Insurance Group at 10.92%, Allstate Insurance Group at 10.23%, and Farmers Insurance Group at 9.85%.
The US personal auto insurance market has also recently shown signs of improvement, supported by state-level measures addressing rate adequacy. These actions have driven higher premiums and contributed to a reduction in aggregate net losses.
What are your thoughts on this story? Please feel free to share your comments below.
