Wheels in motion for crackdown on Illinois car insurers

The five biggest auto insurers in Illinois have raised automobile insurance rates a whopping $527 million since January, an analysis by two consumer groups shows.

That follows about $1.1 billion in rate increases last year by the top 10 Illinois car insurers.

The analysis by the nonprofit Illinois Public Interest Research Group and Consumer Federation of America looked at auto insurance rate increases by the five largest companies in Illinois: State Farm, Allstate, Progressive, Geico and Country Financial, which together make up 62% of the Illinois market.

The price increases come as Illinois’ historically hands-off insurance rules are facing new scrutiny.

Besides being able to raise rates as they like, only needing to notify state officials of their plans, Illinois insurers can consider non-driving factors in setting those rates — such as gender, occupation and whether a person rents or owns a home.

That has resulted in disparities, a Chicago Sun-Times investigation in 2019 found. For instance, you could pay more for car insurance because you’re a woman, no matter what your driving record is.

Now, state Rep. Will Guzzardi, D-Chicago, has introduced legislation to address those issues and crack down on insurers. Guzzardi’s bill would:

• Require automobile insurers to get prior state approval for rate hikes.
• Ban “excessive” insurance increases.
• Prohibit using gender, marital status, age, occupation, schooling, home ownership, wealth, credit scores or a customer’s past insurance company relationships in setting car insurance rates.

Brian Rich / Sun-Times file

It’s already illegal to use race, ethnicity and religion in setting rates. That would continue under Guzzardi’s proposal.

But insurers would have to prove that their business practices — including marketing, underwriting, rate-setting and claims-handling — don’t result in unfair treatment of people based on race, ethnicity, religion, disability, gender or sexual orientation.

The 2019 Sun-Times investigation used companies’ own online price-quote tools to get an idea of the impact of gender, home ownership, occupation, educational attainment and ZIP codes on insurance prices.

Each comparison used the same make and model of vehicle and a fictional driver with a spotless driving record. In more than 300 tests involving seven insurance companies, the Sun-Times found frequent price disparities. Female drivers often were quoted higher prices than male drivers — even for the same type of car and with the same driving record. The same was true for renters and people in lower-skilled jobs or with less formal education.

For people who landed in several unlucky categories, price quotes were as much as 33% higher — $613 more a year.

“The rates should be based on the overall risk and the overall cost,” not factors that penalize people who may be good drivers but have the wrong attributes, says Abe Scarr, state director of Illinois PIRG. “Some of this just comes down to values.”

Illinois, home to State Farm and Allstate, has less regulation than some states, which require prior approval for price increases or prohibit non-driving factors in setting rates.

The insurance industry is gearing up to fight Guzzardi’s proposal. Three industry groups — the American Property Casualty Insurance Association, the Illinois Insurance Association and the National Association of Mutual Insurance Companies — have panned the legislation. They say it would “harm consumers by reducing competition, increasing litigation and likely driving up insurance rates for Illinois drivers.

“By using the variety of rating factors currently in use, insurers can assess drivers’ risks more accurately and price their product based on the likelihood and severity of insurance claims,” the groups say.

They describe the current system as “the fairest way to set insurance rates.”

The legislation would not keep insurers from basing individual customers’ rates on data from an app that logs their driving, such as Progressive’s “Snapshot” program or State Farm’s “Drive Safe & Save.” Such “telematics” programs let companies know exactly what sort of driver they’re insuring in deciding how to price their coverage.

Complaints abound on social media from drivers who say they tried to be model drivers, failed and saw their rates go up.

Now, more rate increases could be on the way.

Allstate — which for the past year and a half has been paying more on auto insurance claims than it’s been taking in from premiums — blames inflation, citing higher prices for repairs and more expensive medical bills for people who are injured.

What happens with those costs is “really anybody’s guess,” Allstate executive Mario Rizzo told investors during a quarterly earnings call Thursday.

“But I think our perspective is — and we’ve been pretty consistent on this point — we’re going to continue to take prices up,” Rizzo said.

SEE VIDEO FROM 2019 SUN-TIMES INVESTIGATION