The American Property Casualty Insurance Association (APCIA), the Illinois Insurance Association (IIA), and National Association of Mutual Insurance Companies (NAMIC) have together issued a statement decrying a newly announced Illinois bill which would limit the number of non-driving factors auto insurance companies can use in setting the rates of consumers.
House Bill 2203, announced yesterday and sponsored by state Senator Javier Cervantes and state Representative Will Guzzardi, would allow the Illinois Department of Insurance to reject or modify rate hikes submitted by auto insurers. It also prohibits auto insurers from setting rates based on a customer’s credit score, gender, race, education level, employment, and other non-driving factors.
The bill’s aim to ban the use of non-driving factors in rate setting has been criticized by industry groups.
“The Illinois bill limiting insurers’ ability to use proven factors in setting rates, to put it simply, is bad public policy,” a joint statement from APCIA, IIA, and NAMIC said. 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 groups also indicated in their statement that changing Illinois’ rating law “will not change the economics or crash statistics that drive the cost of insurance in the state.”
“Illinois’ current insurance rating law has benefited consumers since it was implemented in the 1970s,” the groups said. “Illinois has one of the most competitive insurance markets in the country and that has helped to keep costs below the national average for consumers.”
The statement also picked apart a PIRG study cited by legislators, which said that auto insurance rates in Illinois surged by over $1 billion in 2022. The said report also called for premium reductions.
“Allegations by PIRG for additional auto insurance premium reductions displays a lack of understanding of how auto insurance pricing works,” the joint statement said. “In fact, the report cited is misleading, ignores the big picture, and fails to acknowledge a system that has historically served Illinois consumers well. The bill’s supporters conveniently overlook gruesome road safety data from recent years and instead use formulas untethered from facts to calculate alleged ‘windfalls’ to validate this proposal.”
“Insurance rates are first and foremost a function of claims and their costs,” the groups said. “As these costs fluctuate with market forces, the imposition of price controls through a pre-approval regulatory system may prove more harmful than helpful to consumers.”
In closing, the groups have expressed their opposition to the bill, and have recommended dropping the proposed legislation before it hurts the current market.
“Now is not the time to enact legislation that could result in increased premiums for consumers. This type of legislation could have serious negative consequences for many Illinois drivers, not to mention the state’s auto insurance market, which is currently healthy and competitive.”
Illinois is far from the only state looking to prevent auto insurers from using non-driving factors in rate calculations. Last April, the Delaware Senate passed Bill 231, which sought to ban auto insurers from using gender in setting policyholders’ premiums.
What are your thoughts about the use of non-driving factors in setting auto insurance rates? Leave a comment below.