Working for Illinois Caucus

Illinois House lawmakers have passed an insurance bill to regulate rate increases for home and auto insurance. It now goes to the Senate for a final vote.

The bill makes insurance companies disclose rate increases 60 days before they do it, and will allow the Illinois Department of Insurance to deny any rate increase if they find it exorbitant.

Insurance companies said this bill might increase rates and make the Illinois insurance market less competitive because insurance companies will leave due to more regulations.

Illinois is currently the only state that does not regulate homeowners insurance rates.

The legislation comes after a failed attempt to pass a similar bill, which was supported by Gov. JB Pritzker, in the veto session. The new bill combines the regulations for home and auto insurance, which is supported by the Secretary of State Alexi Giannoulias.

Democratic state Rep. Sharon Chung, representing Bloomington-Normal, voted against the bill seeking to impose regulations on the Twin Cities’ largest employers. Chung said the bill was vague on what constituted an unfair rate increase and what information insurance companies needed to file to the Illinois Department of Insurance.

Chung said now that the bill is going to the Senate floor, there does not seem to be a lot of desire to compromise with insurance companies.

“The way I’ve sort of seen it is that, because they sort of put this bill out there, and at one point, really weren’t willing to sort of negotiate or compromise with industry or even talk to them,” Chung said.

Chung proposed a bill earlier in this session which would have given the state the authority to approve insurance rates, but would not allow for customer rebates. She wanted that to be a conservation starter between lawmakers and insurance companies.

Chung said the trust between insurance companies and the state’s Department of Insurance has been broken. Chung added this is why insurance companies want more clarity with definitions.

Chung did not say what those definitions should be.

Chung said she also has concerns about the talks surrounding this bill about affordability. She added the bill might not be able to stop rate increases.

“That’s kind of one of the reasons why I sort of have been fighting against this bill, because I just don’t think it’s going to do what people think that it’s going to do," Chung said.

Reasons for rate hikes

Chung said some of the rate increases are due to there being more tornadoes and severe weather in Illinois.

“I cannot see in any sort of world that prices will go down, to be perfectly honest with you, because just because of the storms, the amount of storms that we’ve had,” Chung said.

Chung said the Illinois legislature should look at other causes that are driving up rates like the “storm chasers” scam which could affect insurance rates.

Storm chasers are people who come directly after a storm saying they can repair people’s houses, but these repairs are not covered by insurance.

Sean Kevelighan, CEO of the Insurance Information Institute, said there are multiple drivers that increase insurance rates.

Kevelighan said inflation has been increasing the cost of materials and equipment.

“We had an extraordinary amount of inflation coming out of COVID for five years," Kevelighan said. "Those inflation rates are now normalizing into a level that you know is much more manageable, two to 3% for replacement costs.”

Kevelighan said as inflation slows down, it makes more money available for claims and provides discounts.

Kevelighan said the 60-day notice before raising premiums that are above 10% could make insurance companies increase rates more because they can not adapt as quickly to a changing market.

“It’s the longer that you apply approval timing, and you force such approval timings in such a way it can, it can have negative impacts,” Kevelighan said.

Kevelighan said Illinois should focus more on helping people reinforce their home and continue looking into other areas to decrease rates.

State Sen. Michael Hastings, a Democrat representing a suburb of Chicago, said the bill might not decrease rates but could slow the rate increases, thus making insurance more affordable.

“We have to do our best to make sure that the quality of life that they have, number one, is good and that it’s affordable. And by passing this law, at least [the bill] I passed over [to the House during the veto session] was solely to protect our homeowners,” Hastings said.

Hastings had previously supported a bill focused only on homeowners insurance which passed the Senate but never got a vote in the House.

Hastings said the Senate still has to review the bill before making a final vote.

“We have to look at the definitions, we have to look at the rebates, and we have to look at the filing authorities with the Department of Insurance,” Hastings said.

B-N insurers aren’t in favor

State Farm said they do not support the bill because it might make Illinois a less competitive market and the reason rates are going up currently is because of a rise in natural disasters.

“We are disappointed by the outcome of the Illinois House vote. This state has had the most competitive and stable insurance market in the country for more than 50 years. We believe this action will undermine auto and homeowners’ insurance rate predictability, market stability and reduce competition while ultimately leading to higher insurance prices for Illinois residents,” State Farm spokesperson Gina Morss-Fischer said in a statement.

Morss-Fischer said the bills currently in the legislature do not deal with why higher rates are needed. She noted State Farm had recently announced a rate cut for auto insurance.

Sarah Revell, assistant vice president of public affairs at American Property Casualty Insurance Association [APCIA], spoke on behalf of Country Financial.

“Illinois families are already facing an affordability crisis with property taxes, gas, grocery and utility bills all rising. Inflation is squeezing household budgets from every direction. At a moment when lawmakers should be laser-focused on affordability, the General Assembly is instead advancing radical legislation that would make both auto and homeowners’ insurance more expensive for nearly every Illinois household. These are added burdens Illinoisans simply cannot afford,” Revell said in a statement.

Revell said the bill could destabilize Illinois’ insurance market and ignores that auto insurance rates have been decreasing in Illinois.