Why Your Car Insurance Rate Can't Go Up After The CA Wildfires

CALIFORNIA -- As Southern California continues to contain the last of several fires to scorch through the region, the question that has been lingering on social media is whether car insurance rates will be affected. But state officials want to squash the rumor that California drivers will have to pay more to insure their cars in the aftermath of the worst fire season in state history.

Kelly Turner, a San Diego County resident, said she is just one Californian who was told her car insurance rate would increase as the state sees more natural disasters. Turner said her policy with Progressive, a nationwide provider of auto insurance, was $1,490. She received a renewal notice this week saying the policy would increase by $1,723.

Turner, who wasn't in any car accidents in the past year, said she asked her agent about the rate increase.

"When I inquired about why there was a jump, I was told it was because they had to reevaluate rates due to a variety of factors, including recent natural disasters in the state," Turner said. "I said, 'Like the fires?' and was told that that could play a part in it. I was told that the company occasionally has to adjust rates to factor in expenses such as natural disasters."

A shocked Turner shared on Facebook that she had to pay 15 percent more on her car insurance as a California resident.

But, a spokesperson for the state Department of Insurance said the Progressive agent was misinformed on how rate increases work in California.

Nancy Kincaid, press secretary for the California Department of Insurance, said the company, along with other insurance companies, must have their rates approved by the department before they implement them.

"Progressive does not have an approved rate," Kincaid said. "Insurers have to use their losses and their projected losses to justify raising their rates. There hasn't been a catastrophic loss of cars from wildfires. (The Progressive agent) gave her inaccurate information."

A spokesperson for Progressive said, "When communicating with Ms. Turner, it was stated that her rate could have increased due to the recent wildfires but I can assure you this is not the case. We have not adjusted our rates because of the wildfires."

Christopher Thornberg, director for the Center for Economic Forecasting and Development at UC Riverside's School of Business, said California's regulated insurance market makes it unlikely that insurers will simply raise rates on consumers because of the wildfires.

"Are fires a sufficient risk? The answer is no," Thornberg said. "I'm guessing of all of the claims, that fires are pretty small. It's an act of God issue. We had a bad wildfire season but not bad enough to suggest there is an increase in risk for the companies to respond with rate increases. If they do, they are playing games."

Thornberg explained the state Department of Insurance ensures companies charge adequate prices while still earning a profit.

"We have to recognize that insurance companies still have to earn a profit," Thornberg said. "That profit is derived from then getting just a little bit more than they charge on premiums. It's kind of like the state of Nevada, which oversees the slot machines. It is regulated. They are earning a reasonable rate of return but not an obscene one."

Kincaid said if car insurance rates increase it's because cars are simply becoming more expensive as gadgets, such as back-up cameras, are added to cars. She said any consumers who are told their rates are increasing should review their driving history with their insurance agents. If anyone is told it's because of the wildfires, they can call the Department of Insurance for help.

"If you're given information that makes you scratch your head, this department is here to help," Kincaid said. "We can get it corrected."

To reach the California Department of Insurance, call 1-800-927-4357.

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