Illinois bill that would create auto and home insurance rate review process passes through house
An Illinois bill that would create a rate review process for auto and homeowner insurance in the state has passed the house.
The bill, SB 1486, follows Illinois Gov. JB Pritzker calling for legislation in July after State Farm hiked homeowners insurance by 27.2%.
Illinois, home of State Farm and Allstate, is the only state without a regulatory rate review process.
If approved by the Senate and signed by the governor, the bill would give the Department of Insurance (DOI) authority to review rates. If it finds a rate excessive, inadequate, or unfairly discriminatory, the DOI will send a notice to the company within 60 days of a filing.
The notification could include modifications to the filing that are required. It also will provide a time period that the company can reply within to request a hearing.
If the rate is still deemed to be excessive, inadequate or discriminatory following the hearing, the filing will no longer be effective and rebates must be remitted to affected customers.
The bill also prohibits an insurance company from cost shifting. It says that credible state-specific loss experience shall be used in the development of rates whenever such data is statistically available and reliable.
Pritzker accused State Farm of shifting costs from other out-of-state disasters to Illinois.
The bill was amended before approval to pull in language from HB 3799. That language keeps insurance companies from imposing renewal premium increases of more than 10% unless it notifies the policyholder at least 60 days prior to the renewal or anniversary date.
Multiple insurance industry associations have raised concerns about the bill including the American Property Casualty Insurance Association (APCIA) and National Association of Mutual Insurance Companies (NAMIC) which issued a joint press release last week.
The groups warn that the bill is “one of the most sweeping and harmful insurance regulatory overhauls in state history.” It says the bill will likely raise premiums, reduce consumer choice, and destabilize Illinois’ insurance market.
The release claims the bill would increase homeowners insurance by 20% and up to $230 on average, with auto insurance premiums also likely to increase.
It also claims that injecting politics into rate decisions would slow filings and delay needed adjustments. It says it would destabilize a market that has historically been one of the most competitive in the nation.
Illinois homeowners’ insurers experienced an 8.3% underwriting loss over the last decade and a 30.3% loss in 2023 alone, it says.
Auto insurance premiums have averaged a 2.7% underwriting loss over the last decade and despite these challenges auto insurance rates in Illinois are 18% below the national average, it says.
While insurance companies argue the bill would increase premiums, the bill’s House sponsor Rep. Thaddeus Jones (D-20) said on the House floor that it would do the opposite.
“This legislation is important to home and car owners of Illinois who are struggling with increasing insurance rates,” Jones said.
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