Illinois bill would add restrictions on insurers | Insurance business America
While some states are trying to uncover rules that drive operators away, one is taking a different approach
Engine & Fleet
By Kenneth Araullo
In an effort to control the rising cost of auto insurance in Illinois, lawmakers in the state House of Representatives have passed a law requiring insurers to seek state approval before adjusting their rates.
Alexi Giannoulias, the Illinois Secretary of State, has expressed support for the bill and highlighted its potential to give the Department of Insurance the authority to review and regulate any proposed increases in insurance rates.
The initiative comes amid a significant increase in vehicle insurance costs in Illinois, which have increased by more than $2.4 billion since the start of 2022.
Research from the Illinois Public Interest Research Group shows a sharp increase of $1 billion in 2022, followed by another $1.259 billion in 2023, underscoring the urgent need for regulatory intervention. What the research doesn’t show are previous years when interest rates actually fell across the country.
The development has prompted the Illinois Coalition for Fair Car Insurance Rates to move forward and advocate for greater regulatory oversight of what insurers can charge their customers.
In particular, State Farm and Allstate, which together hold a 40% share of Illinois’ auto insurance market, have been identified as the main contributors to the rate increases – although these increases don’t just stop at cars.
In February, both insurance giants announced plans to raise homeowners’ insurance premiums in the state, with Allstate’s 12.7% hike already taking effect. State Farm’s 12.3% increase has also been implemented for new business, but those renewing their contracts still have until May 15.
“Insurers ramped up their rate increases in 2023, which was exciting for investors,” Douglas Heller, insurance director at the Consumer Federation of America, told the Wall Street Journal. “But for anyone who needs to buy insurance, it’s been very difficult.”
Late last year, Allstate raised rates by double digits in New York, New Jersey and California after threatening to leave those states if the rate hikes weren’t approved. Despite a record-breaking fourth quarter of 2023, Allstate still ended the entire year with a loss of $316 million.
Eliminate discrimination, whether accidental or otherwise
Guzzardi also claims that the new bill is a measure against the abuse by insurers of certain criteria such as age, race, gender, ethnicity and immigration status.
He said even if insurance agents don’t do it in bad faith, the algorithms used by carriers and underwriters ultimately perpetuate inequality.
“When you use factors like credit score, employment history, home ownership, or zip code, those factors smuggle 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 when setting rates, and that’s true – they can’t ask people their race, they can’t use race explicitly. But the factors bring this legacy that affects the drivers,” he said.
It remains to be seen whether Illinois will pursue a path of interference in the insurance markets that has been tried and failed before – driving away insurance carriers and driving up prices.
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2024-03-28 15:48:34
www.insurancebusinessmag.com
