Are You Prepared for California’s Increase in Minimum Limits?
- Written By Mitchell Paden
With the California homeowners market getting all the national attention due to its coverage availability issues, potential use of catastrophe modeling, and wildfire mitigation filings, it is easy to forget that California has another big change on the horizon impacting personal auto policies: increased minimum statutory limits.
Senate Bill 1107 increased the minimum amount of coverage required for an auto liability policy from $15,000 per claimant and $30,000 per occurrence for bodily injury and $5,000 for property damage (15/30/5) to $30,000 per claimant and $60,000 per occurrence for bodily injury and $15,000 for property damage (30/60/15) This change represents the first increase since 1967.
The new limits do not go into effect until January 1, 2025, but companies should be proactive in assessing how the new minimum limits will impact their book and their corresponding competitive position.
Now is the time for companies to ask: “Is our company fully prepared for the upcoming change in California’s minimum auto liability limits?”
Start Assessments ASAP
The California Department of Insurance (“CDI”) required all auto insurance writers to submit filings by July 1, 2023 to ensure that every program had approved factors in place for the new limits. These filings, however, limited what could be proposed. Only companies with no factors in place for the new limits were allowed to add them, and no changes could be made to existing limit factors.
With the new limits going into effect in a matter of months, each company should be making assessments today about what the new limits will do to its book and its competitive position.
Waiting until the new year—or even later this year—could put companies at a significant risk of adverse selection if their current factors are severely out of line with the competition. Corrective action needs to take place now to gain approval before the roll-out on January 1.
Is your company positioned to get the rate it needs for the new minimum limits?
Projected Increases in Premium for Minimum Limits Policies
Perr&Knight is constantly assessing the industry and has reviewed dozens of filings to understand where the market will move in 2025. Based on the filings submitted in response to the regulation, our experienced actuarial consultants calculate that the following premium increases will result for policyholders currently purchasing the minimum financial responsibility limits:
Top 20 California Writers
| Change | Bodily Injury | Property Damage |
| Mean | 23.8% | 17.9% |
| Median | 24.0% | 13.5% |
| Minimum | 8.3% | 2.4% |
| Maximum | 50.0% | 44.4% |
California Non-Standard Writers
| Change | Bodily Injury | Property Damage |
| Mean | 41.5% | 29.0% |
| Median | 43.0% | 24.0% |
| Minimum | 12.0% | 6.0% |
| Maximum | 63.0% | 55.2% |
Even policyholders purchasing higher than the current minimum financial responsibility limits, but lower than the financial responsibility limits that will be in effect on January 1, 2025, could see a double-digit increase in premium.
Based on our review of the filings required by the regulation, policyholders moving from 25/50/10 limits to the new 30/60/15 limits can expect the following increases:
Top 20 California Writers
| Change | Bodily Injury | Property Damage |
| Mean | 6.0% | 5.9% |
| Median | 4.8% | 4.5% |
| Minimum | 0.9% | 0.4% |
| Maximum | 15.0% | 30.0% |
California Non-Standard Writers
| Change | Bodily Injury | Property Damage |
| Mean | 11.1% | 15.4% |
| Median | 7.7% | 9.0% |
| Minimum | 0.7% | 1.0% |
| Maximum | 54.0% | 42.8% |
The Time to Act is Now
Will your company receive a premium increase in line with the statistics above? If not, a filing to adjust your relativities may be crucial to the health of your book of business. Two of the top 10 writers in California have submitted filings with updates to their increased limits factors in the second quarter of 2024. GEICO is proposing changes to see its premium for policies below the new minimum limits increase by 11% for bodily injury and 34% for property damage.
The need for action is especially true for companies that exclusively write minimum limits. These companies will see every single customer receive an increase in the coverage on their policy. The question is, will the increase in premium be consistent with the increase in the underlying coverage?
Protect Against Adverse Selection
The factors included in the filing required to be submitted by July 1, 2023 may be mispriced due to limitations on what was allowed in that filing. There may have been old, existing factors at those higher limits that are mispriced because they were never used and were not allowed to be changed in the statutory filing.
This can create the potential for some programs to be severely underpriced at the new minimum limits, leaving it susceptible to adverse selection, especially for non-standard auto customers who are highly price-sensitive and more than willing to leave their current carrier for a lower price.
Partner with Experienced Actuarial Consultants
For all these reasons, it is imperative that companies find out where they stand now and determine if they need to make a filing to set proper relativities for each liability limit. Any such filing would need to be submitted soon to allow enough time for review by the CDI and system implementation for a January 1, 2025 effective date for new and renewal business.
Perr&Knight has filed numerous personal auto filings in California, and our actuarial consultants are uniquely qualified to assist companies in assessing their potential competitive position with the new limits and taking corrective action if necessary.
Contact Perr&Knight today if you feel you may need some assistance. Our seasoned actuarial consultants can help you navigate these uncharted waters.
