Across America and here in Illinois, homes and cars are among the most expensive things people buy. But payments on these pricey purchases don’t end with mortgage or car loan installments. Insurance to protect these investments is costly as well — but much less costly than not having insurance, in case of some sort of disaster or accident.

Like almost every other state, Illinois requires that vehicle owners hold an active auto insurance policy. And while no state law mandates homeowners insurance, mortgage lenders, who want to protect their financial stakes in our homes, do.

Given the importance of insurance to our financial security, most states give regulators the power to reject or modify home and auto insurance rate hikes. But not in Illinois. 

Here, insurance companies can raise home and auto insurance prices whenever they want, by however much they want — and regulators have no authority to stop or change those rate hikes. In fact, Illinois is the only state in the entire country where it is legal to charge excessive home and auto insurance rates. Insurers have challenged even the most basic regulatory oversight: This week, Illinois Attorney General Kwame Raoul filed a lawsuit against State Farm over its alleged failure to share data that state regulators need to oversee the insurance market.

Gov. JB Pritzker is trying to fix this. His Department of Insurance filed legislation in the spring that would give the department the ability to reject or modify home and auto insurance rate increases. Along with state House Speaker Emanuel “Chris” Welch and state Senate President Don Harmon, the governor called on legislators in a Tribune op-ed to act on this issue when the Illinois General Assembly convenes for two weeks this October. Despite this strong message from leaders in Springfield, change won’t be easy. The insurance industry is working to block or water down the proposed reforms.

Nothing has highlighted the need for reform more than State Farm’s half-billion-dollar homeowners insurance rate hike this summer. State Farm, which covers roughly one-third of insured homes in Illinois, raised average premiums by 27%, or $750 annually, with some policies rising as high as 40%.

Illinois homeowners insurance rates were already rising sharply before the State Farm increase. Illinois homeowners insurance premiums increased by 50%, from roughly $2,000 to $3,000, between 2021 and 2024. Only one other state saw a sharper increase over that time. 

Not only can Illinois insurers aggressively raise rates when they want; they’ve also failed to lower rates when they should. During the first year of the pandemic, when so many of us sheltered in place and stopped commuting, the risks of driving went way down, but our car insurance rates did not go down in proportion. In one year, insurance companies made close to $1 billion in windfall profits by overcharging Illinois customers an estimated average of $99 per person.

The need for action is urgent. The increased frequency and severity of extreme weather — in particular, wind and hail storms prevalent in the Midwest — promises a future of even greater property damage and even greater rate hikes. Given that, more thorough reviews of rate proposals is critical. It can stop insurers from taking advantage of disasters to raise rates more than they can justify. Ultimately, Illinois will also need to do more to tackle the increasing risk of extreme weather. 

While the State Farm rate hike has catalyzed calls for some sort of insurance reform, it’s crucial that our elected representatives in Springfield enact policies that meet the moment and prioritize consumers getting insurance worth their payments. 

First, that means empowering the Illinois Department of Insurance to review both car and homeowners insurance rate hikes. While homeowners’ rates are in focus right now, legislators should not forget that insurers overcharged Illinois drivers to make windfalls during the pandemic, followed by two years of billion-dollar-plus car insurance rate hikes. 

Second, that means preserving the rate review structure the Department of Insurance proposed in the spring, which mandates the department review all car and homeowners insurance rate hikes of 5% or higher. The coalition I lead has advocated for mandatory review of all rate hikes, but agreed to support the proposal, leaving review of smaller rate hikes to the discretion of the department. The law should not make rate review completely discretionary.

There is a reason Illinois is so far behind other states when it comes to basic insurance consumer protections: The headquarters for insurance giants Allstate and State Farm are in Illinois. For years, they’ve used their influence in Springfield to maintain the status quo. We now have a window for reform. The legislature should not squander it with watered-down measures. 

Abraham Scarr is director of the Illinois Public Interest Research Group, better known as PIRG.

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