Car insurance rate hikes could require state approval under new bill

Two state lawmakers from Chicago want to tap the brakes on car insurers who they say continue to raise rates and discriminate against drivers based on credit score, ZIP code and gender.

Forty-eight states have oversight of car insurer’s rate hikes and prohibit that type of discrimination — but Illinois is not one of them.

House Bill 2203 — sponsored by state Sen. Javier Cervantes and state Rep. Will Guzzardi — could change that.

The bill would empower the state’s insurance department to reject or modify rate hikes and would end the use of non-driving factors in setting rates.

The bill, which has been talked about over the last year, comes after car insurers made $896 million in excess profits in Illinois during the first year of the pandemic — when drivers commuted less and costs declined — and then raised rates by more than $1.1 billion in 2022.

“We simply don’t have the tools in place to enforce accountability for the insurance companies,” Cervantes said earlier this week in Springfield.

One of Guzzardi’s constituents had recently transitioned genders, from male to female, and saw an instant 20% increase in their car insurance rate after updating their driver’s license.

“And that is perfectly legal in Illinois,” Guzzardi said.

The bill would prohibit insurers from setting rates based on race, gender, employment, credit, education level, religion, credit score and other factors.

Credit scores and demographic information are used by insurers to discriminate against poorer drivers, Guzzardi said.

Guzzardi pointed to a Consumer Reports analysis that found an excellent driver with poor credit pays nearly $1,000 more a year than a driver with good credit and a DUI.

“I think that tells you the whole story,” Guzzardi said. “This is not about safe driving. This is about people with higher means being charged less and poor folks getting charged more.”

For instance, insurers have charged 30% higher car insurance rates in majority-Black Zip codes compared to other areas with similar accident costs, according to a 2017 ProPublica investigation.

The Illinois Coalition for Fair Car Insurance Rates — composed of 15 consumer, community and civil rights groups — is backing the bill.

Its spokesman, Abe Scarr, also director of Illinois Public Interest Research Group, said car insurance rate hikes should undergo the same state-level review that utility companies have.

The combined proposed rate hikes over the next year that have been put forth by Illinois’ major utilities — ComEd, Nicor, Peoples Gas — is still less than the $1.1 billion rate hike last year by Illinois’ top 10 car insurers, Scarr said, citing a new PIRG study.

Last month, Allstate filed an Illinois car insurance rate hike plan of $63 million, which will raise average customer premiums by $174 a year, without any state oversight.

“Our laws and regulations allowed for over a billion dollars of car insurance rate hikes in a single year without any review,” Scarr said. “It’s time to change that.”

Three car insurance associations — The American Property Casualty Insurance Association, Illinois Insurance Association and National Association of Mutual Insurance Companies — released a statement blasting the bill:

“The Illinois bill limiting insurers’ ability to use proven factors in setting rates, to put it simply, is bad public policy,” the statement said, in part. “This bill is a combination of prohibitions and requirements that will harm consumers, reduce competition, and increase litigation. To enforce the provisions of this legislation a massively expanded state bureaucracy to carry out these regulations will be necessary, the cost of which is also borne by consumers. The legislation will have exactly the opposite effect that the proponents seek.”

The state’s four major car insurance companies — State Farm, Geico, Progressive and Allstate — did not reply to requests for comment.