Car insurers’ pandemic windfalls prompt a response in Springfield, with consumer-minded reforms planned

State Sen. Jacqueline Collins, D-Chicago, wants Illinois to regulate car insurance rates and require other consumer protections. The state insurance department wants more information for the public.

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Even more than a year into the COVID-19 pandemic, fewer cars were on the road, as in this scene last August on the Eisenhower Expressway.

Anthony Vazquez / Sun-Times file

State Sen. Jacqueline Collins, D-Chicago, says she hopes reports that Illinois drivers have had to pay too-high automobile insurance premiums during the coronavirus pandemic will help her find support for consumer-centered insurance reforms.

Being able to see the stark numbers of the pandemic overcharges might prompt legislators — and the car owners who vote for them — to push for and demand that the state’s insurance regulations be rewritten to be more consumer-oriented, as they are in most other states, Collins says.

She says she plans to introduce legislation during the fall veto session to give the Illinois Department of Insurance more power over how much insurers can charge.

According to Collins, the idea is give the department the authority to mandate refunds when premiums are too high and prohibit the use of “discriminatory” non-driving characteristics in setting prices — a problem a Chicago Sun-Times investigation spotlighted.

That would represent a huge change for Illinois, home to insurance giants Allstate of Northbrook and State Farm of Bloomington and historically one of the most insurance industry-friendly states.

Along with today’s high inflation and gasoline prices, the state data showing Illinois customers of the four biggest insurers overpaid by at least $280 million during the pandemic — that the insurers could have provided bigger “coronavirus relief refunds” and still maintained the same profits — people are getting fed up, Collins says.

“People are already hurting,” she says, and car insurance isn’t something drivers can decide to cut out of their budget. “We are a state that requires consumers to purchase insurance.”

The Illinois pandemic windfall data, posted online at the end of June, provided a rare window into the workings of the industry here. State regulators had demanded that all auto insurance companies operating in Illinois disclose how much money they took in, paid out and kept for themselves during the height of the pandemic.

The insurers did quite well, the figures showed, even after making the “pandemic relief” refunds they trumpeted.

Illinois’ four biggest auto insurers — State Farm, Allstate, Progressive and Geico — collectively took in about $280 million more in premiums in 2020 than they needed to maintain their 2019 profitability, even after accounting for $220 million in pandemic refunds, according to an analysis by the Consumer Federation of America and the Illinois Public Interest Research Group, two nonprofit consumer advocacy organizations.

Collins views California’s insurance regulation as a model. Its insurance department needs to approve of any proposed rate increases before they can take effect. It also requires insurers to accept as customers any good driver who wants a policy. And it prohibits the use of credit scores in determining premiums, among other powers.

A dozen states require auto insurers to get prior approval from regulators before raising rates and more require companies to disclose planned increases before setting them in motion, according to the Consumer Federation of America.

In Illinois, auto insurers can set whatever rates they want and report them to the state after they’ve already begun charging customers more.

A 2019 CFA study found that, over the long haul, states that require prior approval for insurance price increases were better able to slow the rate of increases.

In addition to Collins’ planned bill, Illinois state insurance department leaders are working on their own veto session bill “to increase transparency and accountability,” agency spokeswoman Caron Brookens says.

The aim is to make insurance data more available to the public. 

The insurance industry has pushed back on criticism that it should have given back more of its pandemic windfalls to policyholders. Industry groups say that, even though roads were largely empty early in the pandemic, the number of total miles driven rebounded, with more people speeding and fewer wearing seatbelts.

They point to National Highway Traffic Safety Administration traffic crash data, which showed that the first year of the pandemic was especially deadly. Nationwide, 38,824 people were killed in roadway crashes in 2020, the highest number since 2007. In Illinois, 1,194 people died as a result of crashes in 2020, up 18.3% from 2019.

With inflation and supply-chain troubles making auto repairs more costly, the industry says insurers ought to be able to charge whatever premiums the market will bear.

The big four in Illinois are raising rates, with Geico leading the way, with an average 17% increase for some longtime customers starting next month.

Abe Scarr, the state director of Illinois PIRG, a consumer advocacy group that supports greater oversight of auto insurance rates, says it would be a “heavy lift” for Illinois legislators to approve consumer-oriented insurance reforms, but “the timing could be right.”

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