State lawmakers, officials seek input into how auto insurance rates are set

Chicago Tribune

3 days ago

Just weeks after Gov. JB Pritzker called for action following State Farm's 27.2% rate hike for homeowners insurance, some state lawmakers and officials said they are renewing efforts to address the steady rise in auto insurance rates.
Curbing the cost of auto insurance has been the subject of several legislative proposals in the last couple of years, but those measures have yet to go anywhere.
The Illinois secretary of state's office, which has unsuccessfully promoted a measure that would eliminate factors such as credit scores and advanced age from being used as metrics to set car insurance rates, is set to launch a campaign to highlight why it thinks employing those factors is unfair to consumers.
'This, to me, is an economic justice issue. People are struggling to pay their bills. People are required to have car insurance, and it's becoming unaffordable for folks to have it,' Giannoulias said. 'So if the purpose of auto insurance is to protect the eight and a half million Illinois motorists, it only makes sense that their driving records … serve as the primary factor for setting their rates.'
Car insurance rates have climbed across the country. According to the finance website Bankrate.com, the rates have increased at a slower pace compared to past years but from 2023 to 2024, full coverage auto insurance jumped by an average of 14% and by 12% from 2024 to 2025.
The website, citing an official from the Insurance Information Institute, attributed the rising rates to some of the worst underwriting losses in decades. Bankrate.com also suggested President Donald Trump's administration's tariffs on vehicles and auto parts could affect car insurance costs.
Democratic state Rep. Will Guzzardi of Chicago, who has worked on legislation aimed at regulating car insurance rates, said he is optimistic there's enough will in the legislature to take on high costs of auto insurance, but acknowledged the need to do so without harming the insurers doing business in Illinois.
'We want to maintain a vibrant, competitive insurance market in Illinois, where companies are competing for your business, and that drives prices down,' Guzzardi said. 'Premiums are rising and Illinois consumers are bearing the brunt of it, and government needs to step in and protect us from those kinds of abuses.'
A bill Guzzardi introduced in January would bar insurers from refusing to issue or renew a policy of auto insurance based in whole or in part on 'specified prohibited underwriting or rating factors.' The bill would require auto insurers to show that their handling of claims and algorithm models do not unfairly impact any group of customers based on factors including race, gender, religion or sexual orientation.
The bill has been stalled in the House, and Guzzardi acknowledged the difficulty in getting such legislation passed given the insurance lobby's power in Illinois, which is home to both State Farm and Allstate.
'If it's a reasonable increase and (insurers) can justify it, then it's fine. But if they're just raising their rates to protect their profits and pad their CEO pay, then the state has the ability to veto or reduce those premium increases,' Guzzardi said. 'And it (seems) really unfair to base someone's car insurance premium on factors that are out of your control and have nothing to do with whether or not they're a good driver.'
In a statement, the Illinois Insurance Association, along with the American Property Casualty Insurance Association and the National Association of Mutual Insurance Companies, said that 'Insurers are not permitted to use and do not use factors like race, income, religion, and/or ethnicity in setting rates. This is true in Illinois and in every state.'
But the organizations defended the criteria that are used to set rates.
'Allowing insurers to continue using a wide set of objective criteria to determine risk and set rates will ensure this market can continue to flourish,' the statement read. 'We oppose efforts to limit the actuarial process that has driven companies out of other large states and led to increased premiums for the majority of policyholders.'
Another bill that has languished in the legislature, which would affect homeowners as well as auto insurance, would require insurance companies to open their books so that state officials can assess whether the rate increases are too burdensome. Insurers would need to provide information on their rates to the state's Department of Insurance '60 days in advance of a proposed aggregate rate change of 5% or more.'
This legislation has the backing of the Pritzker administration and could be the subject of debate during the two-week veto session in October since lawmakers and the insurance industry were busy during the spring session haggling over the bill's details.
According to the secretary of state's office, Illinois is one of only two states, the other being Wyoming, that doesn't require a rate review process to protect auto insurance customers from excessive rates.
The influence a person's economic status has on their insurance rates has long been a point of contention.
Two years ago, the Consumer Federation of America issued a 25-page report showing the impact of car insurance rates when consumer credit information for good drivers who have decent or bad credit scores are factored in by insurers.
The 2023 report showed that Illinoisans who were safe drivers with excellent credit paid an average annual premium of $424 for auto insurance, while consumers with a comparable driving record and fair credit paid around $607. At the same time, the report notes, safe drivers with poor credit paid an annual average of $915. These findings were echoed nationally, according to the report.
'These credit disparities are connected to systemic biases against Black, Latino, and Indigenous communities and long-standing structural hurdles to achieving financial stability for communities of color,' the report said. 'When credit information is used to construct credit-based insurance scores for underwriting and rating auto insurance, the result is higher auto insurance premiums for drivers of color.'
'Insurance companies use these rating factors, these non-rating factors, significantly, to set rates, and that can lead to both discriminatory and absurd outcomes,' said Abe Scarr, director of the Illinois Public Interest Research Group, which posted the report on its website. 'Also, it's, I think, somewhat less pronounced and maybe less investigated as well, but they're doing this with homeowners insurance as well.'
Under a bill pushed by Giannoulias' office during the spring legislative session, the secretary of state, in partnership with the Office of Risk Management and Insurance Research at the University of Illinois, would look into 'the use of ZIP codes, credit scores, and age in ratemaking and whether the specific factor results in inequitable rates being assessed to certain populations.'
The bill had 16 Democratic House sponsors and 17 Democratic Senate sponsors. It passed through the Democratic-controlled House in April on a 70-39 vote. But it never made it through the Senate.
State Rep. Jeff Keicher, a Republican from Sycamore who sits on the House Insurance Committee and opposed the bill, said Illinois has one of the lowest rate environments 'given the factors that we are currently using.' The competitive market helps consumers because if the rates are too high with one carrier, they can easily move to another.
He said eliminating factors such as where a customer lives and their credit score could increase the rates for suburban drivers.
'So you'd have a rate in Chicago the same as a rate in the middle of a cornfield in Illinois,' said Keicher, a 30-year insurance agent who said he was not speaking on behalf of the industry.
'The industry has proven time and again that that credit-based score is effective and accurate, and there have been no other challenges once regulators have looked at the direct correlation in accident propensity with the factors that insurance companies are currently using,' Keicher said.
Kevin Martin, executive director of the Illinois Insurance Association, said there have been a number of studies over the years purported to show credit scores are an appropriate metric, including one that concluded 'better credit scores correlate with lower insurance risk.'
As for Giannoulias' bill from the spring, Martin's group had concerns over whether the secretary of state's office's involvement in the study would've led to a 'very, very biased result,' noting the office has come out 'very much opposed to allowing us to use these factors.'
'We have no objections to having a study,' Martin said. 'We were opposed to any reference and any language that would have put (the) secretary of state's office in a position to conduct, lead and write the report.'
Lou Sandoval, president and CEO of the Illinois Chamber of Commerce, which advocates for businesses in the state, echoed Martin's criticism of the bill.
'We're not against transparency of trying to say, 'Hey, listen, what should we get done?'' he said. 'What was problematic is the bill sought to do a study that basically abided with the (confirmation) bias of the bill itself.'
'It was like, 'we're going to do a study to confirm the fact that there's racist policies in place, not to identify what the policies are and whether they're racist or not.' It's like 'we have a thesis. The thesis is, this is racism, and that's the direction we're going,'' Sandoval continued. 'And you know, writ large, we have a problem with government basically stepping in and whacking industries that are major employers in the state.'
The statewide advocacy campaign being launched by the secretary of state's office, dubbed 'Driving Change,' will ask state residents 'to share their stories about unfair and discriminatory ratemaking practices employed by auto insurance companies,' according to a news release from Giannoulias' office.
There will be town halls on the issue over the next several weeks throughout the state, and the secretary of state's office would be conducting a study using feedback from residents to determine whether factors such as credit score, ZIP code and advanced age unfairly raise insurance premiums for residents.
From there, the feedback could be used to aid in crafting new legislation over what factors to include when setting car insurance rates, the secretary of state's office said. Locations and times of the town halls would be posted on www.ilsos.gov/drivingchange.
'To me, it doesn't matter whether you live on the South or West side of Chicago or in rural southern Illinois,' said Giannoulias, whose name has been floated as a potential Chicago mayoral contender in 2027. 'Our point is, base it on driving record.'