In a move aimed at controlling the increasing costs of auto insurance in Illinois, lawmakers in the state’s House of Representatives have introduced legislation requiring insurers to obtain state approval before adjusting their rates.
The bill, titled House Bill 4767 or the Motor Vehicle Insurance Fairness Act, spearheaded by Representative Will Guzzardi (D-Chicago), seeks to enhance the oversight capabilities of the Illinois Department of Insurance over rate modifications. Guzzardi attempted a similar bill last year that never made it out of the House.
Alexi Giannoulias, the Illinois Secretary of State, has voiced support for the bill, highlighting its potential to equip the Department of Insurance with authority to scrutinize and regulate any proposed increases in insurance rates.
The initiative comes against the backdrop of a significant rise in Illinois auto insurance expenses, which have surged by more than $2.4 billion since the onset of 2022.
Research conducted by the Illinois Public Interest Research Group reveals a steep increase of $1 billion in 2022, followed by an additional $1.259 billion in 2023, underscoring the pressing need for regulatory intervention. What the research doesn’t show is earlier years when rates across the nation actually dropped.
The development has prompted the Illinois Coalition for Fair Car Insurance Rates to push further, advocating for increased regulatory oversight over what insurers can charge their customers.
Notably, State Farm and Allstate, which together hold a 40% share of the Illinois auto insurance market, have been identified as the primary contributors to the rate hikes – although these surges do not end with just cars.
In February, both insurance giants announced plans to raise homeowners’ insurance rates in the state, with Allstate’s 12.7% hike already in effect. State Farm’s 12.3% hike has also been implemented for new business, but those renewing still have until May 15.
“Insurers kicked their rate hikes into high gear in 2023, which has been thrilling to investors,” Douglas Heller, director of insurance at the Consumer Federation of America told the Wall Street Journal. “But for everyone who has to buy coverage, it has been very difficult.”
Late last year, Allstate increased rates by double figures in NY, NJ and Calif after threatening to leave those states if the rate hikes were not permitted. Despite a bumper Q4 in 2023, Allstate still ended the whole year with a $316m loss.
Guzzardi also claims that the new bill is a measure against insurers abusing certain criteria such as age, race, gender, ethnicity, and immigration status.
He said that even though insurance agents are not doing it with bad intent, algorithms employed by carriers and underwriters end up perpetuating inequality.
“When you use factors like credit score, like employment history, like homeownership, like ZIP code, these factors are smuggling in histories of discrimination. Decades, centuries, legacies of discrimination,” Guzzardi said in a WTTW report.
“The insurance industry will tell you they can’t use race in setting rates, and that’s true — they can’t ask people their race, they can’t use race explicitly. But the factors bring in this legacy that affects drivers,” he said.
What remains to be seen is whether Illinois is about to follow a path of interfering in insurance markets that has been tried and failed before – driving carriers away, and prices up.
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