Illinois Seeks Limits on Socioeconomic Data in Auto Insurance Pricing

The Illinois Secretary of State, Alexi Giannoulias, has initiated a campaign to restrict the use of socioeconomic data in auto insurance pricing, aiming to limit factors like credit scores, age, and third-party data from social media in rate setting. The campaign argues that only on-road behavior should determine premiums, citing studies that show drivers with safe records but poor credit paying more than those with convictions but better credit. This initiative has spurred debate in Illinois, with industry groups and trade associations opposing the move, emphasizing that removing such risk factors could disrupt actuarial practices and market stability.

Industry representatives also question the decision to have the Secretary of State lead a formal investigation mandated by Illinois House Bill 1234, suggesting the Department of Insurance, with its regulatory expertise, would be more appropriate. The investigation, due by January 2026, aims to analyze whether the use of non-driving factors like ZIP codes and credit scores disproportionately impacts certain demographics.

Similar regulatory discussions are ongoing in other states such as New York, where legislators have proposed limits on the use of credit history in underwriting and renewals, challenging industry practices that consider these data points critical for accurate risk assessment and maintaining competitive markets. This evolving regulatory environment highlights the balance states are seeking between consumer protection, fair pricing, and actuarial soundness in auto insurance underwriting and rate setting.