By Mark Robinson
A major shift is coming to automobile insurance coverage in California. On September 28, 2022, Governor Gavin Newsom signed Senate Bill 1107, also known as the Protect California Drivers Act, into law, which will double minimum auto liability limits. The legislation, effective January 1, 2025, will increase the current minimum of $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, $60,000 per occurrence for bodily injury, and $15,000 for property damage (30/60/15). For insurance agents, it is critical to understand the implications of these new requirements and proactively communicate with clients as the changes approach.
Why Are Limits Being Increased?
The underlying reason for the increase in liability limits comes down to rising costs in various sectors. Since 1967, when the current minimums were set, both the cost of living and the expenses tied to car accidents have risen sharply.
Vehicle repair costs, medical care, and litigation expenses have all surged. Add inflation and ongoing supply chain challenges to the mix, and the financial landscape for accident claims has drastically shifted. The increased statutory limits are designed to ensure that individuals involved in accidents have sufficient coverage to avoid personal financial ruin when paying for vehicle repairs, medical expenses, and other accident-related costs, and reflect the reality of the modern auto insurance environment, where even minor accidents can result in significant financial liability.
The Consequences of Increased Limits
While the new limits provide better protection for car accident victims, they come with potential downsides for certain consumers. The most immediate impact will be an increase in premiums for drivers currently holding minimum coverage policies. This is a cause for concern for individuals on fixed or lower incomes, who may find themselves priced out of required insurance coverage. As premiums rise, California could see an increase in uninsured drivers, exacerbating an already significant issue.
Another possibility is an uptick in participation in California’s Low-Cost Auto Insurance Program. This state-sponsored initiative offers affordable liability insurance to low-income drivers and may become even more attractive as premiums increase.
Additionally, the higher limits could have a ripple effect in the legal realm. With more coverage available, there may be a financial incentive for plaintiffs’ attorneys to pursue lawsuits more aggressively. This could lead to more frequent litigation following car accidents, placing additional pressure on insurance providers and the court system alike.
What Should Be Top of Mind for Agents?
With the new regulations approaching, insurance agents have a critical role to play in helping clients navigate the transition. First and foremost, agents should proactively reach out to customers currently carrying minimum limits to discuss the new coverage requirements. Comparing rates among carriers may help clients find the best pricing as they adjust to the increased limits.
Agents may also want to advise clients to explore other cost-saving measures, such as increasing comprehensive and collision deductibles, or even eliminating comprehensive and collision coverage altogether on older vehicles. These strategies can help offset the premium increases associated with higher liability limits.
What About Uninsured and Underinsured Motorist Coverage?
Given the likelihood of more uninsured drivers as premiums rise, agents may want to encourage clients to consider increasing their uninsured motorist (UI) and underinsured motorist (UIM) coverage, to the extent clients have purchased—or elect to purchase—it. Of note, starting in 2025, UI and UIM limits must increase to match the new liability minimums.
Additional Increases in Liability Limits
The minimum coverage requirements will increase again on January 1, 2035, to:
- $50,000 for bodily injury or death per person,
- $100,000 for bodily injury or death per occurrence,
- $25,000 for property damage.
These future increases will provide further protection to accident victims, ensuring that liability coverage continues to reflect inflation and the rising costs of healthcare and vehicle repairs.
Conclusion
As California moves towards implementing SB 1107, insurance agents must be prepared to guide their clients through this significant change. Increased minimum liability limits will affect premiums, coverage options, and even the legal landscape surrounding auto accidents. By staying informed and proactive, agents can help their clients adjust to the new requirements while ensuring they remain protected on the road.
Mark B. Robinson is a founding partner of Michelman & Robinson, LLP, a national law firm headquartered in Los Angeles. In his capacity as Property & Casualty Regulatory Chair at M&R, Mark primarily represents retail brokers and agents and offers a free legal hotline to Alliance members. He can be contacted at 310-299-5500 or mrobinson@mrllp.com.
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