Illinois Insurance Legislation: Addressing Rate Hikes and Compliance
In Springfield, Illinois, legislators are actively working to expand the regulatory compliance requirements of the Illinois Department of Insurance. This move arises in response to a substantial increase in homeowners insurance premiums announced last year by State Farm Insurance. Governor JB Pritzker has urged lawmakers to focus on new legislation following State Farm's decision to implement an average 27.2% rate hike, largely influenced by sustained losses in property casualty coverage due to weather-related incidents.
A previous proposal allowing the Illinois Department of Insurance to review and potentially reject rate increases had passed the Illinois Senate last fall. However, the bill narrowly failed in the House by a margin of four votes. Rep. Robyn Gabel, a leading sponsor, reintroduced the motion, demonstrating ongoing efforts to advance regulatory measures in the insurance industry.
Regulatory Compliance and Industry Challenges
Kevin Martin, Executive Director of the Illinois Insurance Association, emphasized that legislators will have another opportunity to address these issues as the 2026 legislative session begins. Gabel, speaking through a spokesperson, noted that reintroducing the vote remains a possibility, reflecting the persistent industry focus on regulatory reform.
As a "use-and-file" state, Illinois allows insurers to adjust rates immediately upon filing with regulators, bypassing prior approval—a stark contrast to most other states. This unique regulatory framework has sparked criticism, with Douglas Heller from the Consumer Federation of America highlighting Illinois' lenient statutory provisions. Governor Pritzker has expressed concerns about insurers potentially redistributing disaster-induced losses from other states to Illinois, underscoring the legislative need to prevent such actions.
Proposed Legislative Amendments and Industry Reactions
The proposed amendment, attached to House Bill 3799, seeks to rectify these issues. It aims to introduce clauses against "excessive, inadequate, or unfairly discriminatory" rates while prohibiting "cost-shifting" by mandating the use of state-specific data in rate calculations. Though it retains the "use-and-file" system, it requires a 60-day notice for any rate increase exceeding 10%.
The provision granting the Department of Insurance authority for retrospective rate audits poses a contentious point for insurers. Martin pointed out industry concerns regarding the indefinite scope of such audits, which could require customer repayments for unjust discrepancies. These concerns have emerged as significant issues during legislative negotiations.
As the legislative session progresses, addressing these regulatory compliance concerns will be a priority. With Governor Pritzker preparing to deliver his budget and policy priorities in the State of the State address, the focus remains on balancing industry requirements and consumer protection within the regulatory framework.