Illinois is one of just two states in the country—Wyoming is the other—where regulators have no authority over rate changes, bill proponents said today. The 10 largest auto insurers in Illinois collectively hiked rates by more than $1 billion just last year as the industry scrambles to respond to rising claims costs, Illinois PIRG Director Abe Scarr said.
"We simply don’t have the tools in place to enforce accountability for insurance companies," Cervantes said at the press conference.
Industry groups in a long statement blasted the bill as "bad public policy."
"This bill is a combination of prohibitions and requirements that will harm consumers, reduce competition and increase litigation," according to the response by the Illinois Insurance Association, the American Property Casualty Insurance Association and the National Association of Mutual Insurance Companies. "To enforce the provisions of this legislation, a massively expanded state bureaucracy to carry out these regulations will be necessary, the cost of which is also borne by consumers. The legislation will have exactly the opposite effect that the proponents seek."
The measure also would bar insurers from setting rates based in part on consumer attributes having nothing to do with their driving record. Those include credit scores, where drivers live, marital status and age.
"Those factors just have no place in setting rates," Guzzardi said.
The insurance lobby in Illinois traditionally has easily blocked initiatives like this. With two auto insurance giants, State Farm and Allstate, headquartered in the state and each employing thousands here, lawmakers have been reluctant to take action the companies oppose.
But there arguably has never been a year like 2022, at least in terms of auto insurance rate hikes. Leading that charge has been Northbrook-based Allstate, which raised average premiums for individual policyholders by hundreds of dollars just in the past year.
State Farm, which insures about one in three Illinois vehicles, increased auto rates three separate times last year, collectively increasing average annual premiums by nearly $130.
The next two largest insurers, Geico and Progressive, also substantially hiked prices.
The industry says there’s a reason for the higher prices. The costs to settle claims has soared, and many auto insurers are losing money.
"Changing Illinois’ rating law will not change the economics or crash statistics that drive the cost of insurance in the state," the industry groups said. Over history, auto insurance rates in Illinois have been in the middle third of states across the country, the industry says.
Insurance rates differ from state to state, with regulators in each state overseeing changes in different ways. Some require prior approval before rate hikes can take effect. Others allow the companies to hike their rates when they file but have authority to overrule those price changes after the fact. Illinois simply requires insurers to provide notice of the new prices and give regulators next to no say over the matter.
One issue that hampers industry critics is the difficulty in determining the states where a national insurer like Allstate makes money and the states where it doesn’t.
With insurance oversight here far more lax than in other states, there’s suspicion that companies are hiking rates more in Illinois than in states where there are more regulatory hurdles.
The industry emphasizes that car insurance is highly competitive in Illinois, so consumers can respond to sharp rate hikes by switching. Many fail to do that, though. Retention at Allstate remains at nearly 90% nationally despite multiple rate hikes in most states over the past 18 months.
Advocates for Guzzardi’s bill say it addresses a civil rights issue as well. William McNary, co-director of Citizen Action Illinois, said today that a driver with the same attributes and driving record living in Chicago’s majority-Black Austin neighborhood will see their car insurance costs drop substantially if they move just a few blocks west to affluent Oak Park.
Illinois PIRG’s Scarr described it as "redlining through insurance rates."
Responded the industry groups: "By using the variety of rating factors currently in use, insurers can assess drivers’ risks more accurately and price their product based on the likelihood and severity of insurance claims. The use of these tools benefits consumers and is the fairest way to set Insurance rates. . . .If insurers are unable to utilize risk factors when determining rates, it will lead to a one-size-fits-all approach to pricing, eliminating competition in the marketplace, and ultimately driving prices up for all consumers."
via Crain’s Chicago Business
February 8, 2023 at 08:14PM