Business
State Farm’s Insurance Rate Increase Sparks Backlash From Advocates, Lawmakers
Illinois homeowners could soon face a higher insurance bill.
State Farm is raising its rates by 27% starting Aug. 15 — which could cost customers $475 more on average.
The company said it’s hiking prices because of inflation and more severe weather hitting Illinois. But Gov. JB Pritzker and consumer advocates are pushing back and calling for more home insurance regulations.
Abe Scarr, director of the Illinois Public Interest Research Group, said those types of regulations are important to keep insurance companies in check. He said Illinois should be like other states and adopt basic laws that give public institutions the authority to review rates and determine whether increases are excessive.
“It’s not necessarily the case that it means they need to raise rates by half a billion dollars,” Scarr said. “Fundamentally, we think that rate increases of this size shouldn’t be allowed to go through without some scrutiny from public institutions. This makes the case quite clearly for the need for Illinois to adopt very basic consumer protections that almost every other state has.”
The National Oceanic and Atmospheric Administration reported 131 tornadoes and 142 instances of severe hail in Illinois so far this year, and 139 tornadoes and 303 severe hail incidents last year. Insurance companies say that increased risks due to severe weather are the main factor contributing to premium hikes.
State Farm isn’t the only company raising its rates; others such as Allstate have also upped premiums, citing increased claim costs from tornado, hail and wind damage repairs.
Scarr said while weather risks have gone up, there should still be an independent party with the public interest in mind to bring more transparency to how companies set premium rates.
“They (insurance companies) have a self interest; they want to be profitable,” Scarr said. “It’s a problem to allow an industry that has a profit motive to self-regulate the price it charges customers.”
Insurance businesses and opponents of Pritzker’s efforts say that such legislation would be government overreach that would limit competition among companies and prevent them from setting premium prices accurately. They say solutions should focus more on giving customers more choices, strengthening homes against extreme weather, promoting accurate pricing and reining in lawsuit abuse.
State Farm said it paid $1.26 in insurance claims costs for every dollar in premium collected last year. State Farm spokesperson Gina Morss-Fischer said those types of losses are unsustainable.
“Home insurance claims costs are exceeding premiums collected in Illinois,” Morss-Fischer told WTTW News in a statement. “Accurate, risk-based pricing makes sure that insurers like State Farm can pay claims during some of life’s toughest moments for policyholders. Over-regulation and refusal to allow companies like ours the ability to charge accurate rates leads to a less competitive market and fewer choices for consumers.”
