Mandatory automobile liability limits will be higher this year in certain states, including California, Virginia, Utah and North Carolina, as provisions of previously passed laws come into effect, AM Best said.
In California, the limits for bodily injury or death of any one person will be increased to $30,000, while the limits for bodily injury or death of all persons will be raised to $60,000 due to a law passed in 2022. The limit for damage to property will also be increased to $15,000. These limits are also expected to increase again in 2035.
Following the enactment of a 2023 law, the state of Virginia will increase its liability limits to $50,000 for bodily injury, $100,000 for two or more injured and $25,000 for property damage.
In Utah, a 2023 law will also increase limits to $30,000 for bodily injury, $65,000 for two or more injured, and $25,000 for property damage.
North Carolina will also increase its limits to $50,000 for bodily injury, $50,000 for property damage, and $100,000 per accident, starting in October.
Experts say that while these changes benefit policyholders, they may see an increase in their insurance rates once these increases come into effect.
Mark Friedlander, director of corporate communications for Insurance Information Institute, said that drivers who currently carry state minimum insurance coverage might see a slight increase to their cost of coverage following the changes.
Tony Cotto, director of auto and underwriting policy for the National Association of Mutual Insurance Companies, also said that increases in minimums necessarily increase coverage cost because higher minimums mean higher risk exposure for carriers.
However, Friedlander said that the cost of auto insurance still varies based on other factors, including motor vehicle record, claim history and the age of the driver listed on the policy. He also said that factors in the local market, such as severe weather events and other natural calamities, as well as rates of vehicle theft and vandalism in the state can also affect the cost of coverage.
Overall, Cotto said that there is no “best formula” for computing minimum limits and lawmakers are continuously looking at various approaches to ensure that mandatory coverage remains affordable and available.
