The last few years saw a relatively stable insurance market with auto insurance, in particular, not seeing any major increases in terms of rates. This trend, however, seems to be ending and the increase in doing business that was handled, so far, by the insurance providers is now passed on to the consumers in the form of rate hikes. This is somewhat reminiscent of the situation that the market was in during the early 2000s when premiums began to skyrocket for all motorists who filed claims. However, there is no indication yet that things are going to be that bad again.
Even so, due to the overhaul of the healthcare system organized by President Barack Obama, the costs are rising again and this is becoming evident in the prices of insurance policies. While health insurance is the one that will suffer the most, other types of policies such as automobile insurance are also seeing increases in price which range around 5% in most markets. California drivers have it a little better off, though, as the average price increase here is much closer to 3%. However, while that may be the current rate hike at the moment, there is no telling yet that this is how it will remain. This will end up being determined by whether insurance providers label the current market as being hard or soft.
Even if rates do increase, this is not expected to be a permanent situation. It is kind of a vicious cycle. Due to increased costs of doing business or increased losses, insurance companies are forced to raise their premiums in order to make a profit again and pass on the risks to the consumer. Once their profit margins are stable again, the insurers will want to attract new customers again and they will do so by lowering their rates or offering various other discounts. If they do this for too long, their losses become too substantial, they create a hard market and will have to repeat the process all over again.
Unfortunately, this means that California motorists can expect to endure a period of time with not only higher premiums, but also very low tolerance in terms of accepting claims and being lenient in certain situations. Most providers will be looking to get rid of all their bad or risky policies and they will use any excuse to do so. Situations that would have previously resulted only with a fine might now end up with invalidating the policy completely, if the law allows it.
To put it in simple terms, car insurance companies are suffering at the moment and they will not suffer alone when they can transfer some of its woes onto its clients. Anybody who will need to file a claim during this period must do it with caution. Insurers will be looking for any loophole or reason to avoid having to pay out. There is no way of telling how long the companies will keep this up, but they cannot afford to do it for very long as it will end up costing them their entire customer base.