Illinois Proposes Legislation to Ban Cost Shifting in Insurance Rates

Illinois State Senator Michael E. Hastings has introduced legislation aimed at addressing insurance rate hikes in the state by targeting the practice known as 'cost shifting.' Cost shifting involves insurance companies passing the financial burden of out-of-state catastrophic events, such as hurricanes and wildfires, onto Illinois policyholders. Hastings' bill intends to ensure that insurance premiums more accurately reflect local risks rather than the costs associated with disasters occurring outside Illinois.
The proposed Senate Bill 2692 seeks to prohibit insurance companies from inflating premiums due to losses incurred in other states. The legislation also aims to implement standards to prevent excessive or unfairly discriminatory rate-setting practices, requiring insurers to align rates with actual risk and expenses specific to Illinois consumers.
Unfair discrimination, as defined in the bill, refers to price differences among policyholders that cannot be reasonably justified by varying levels of risk or cost. Such provisions are designed to foster greater transparency and fairness in insurance pricing, thereby protecting Illinois residents from unjust premium increases.
Additionally, Senator Hastings has filed Senate Bill 2691, which directs the Illinois Department of Insurance to conduct a study on the impact of removing non-driving factors—such as education, credit scores, and occupation—from insurance rate calculations. This study aims to evaluate potential cost savings for consumers and assess the implications on market competition.
Together, these legislative efforts underscore a focus on enhancing regulatory oversight over insurance rate-setting practices in Illinois, promoting rate transparency, and ensuring that consumers are charged premiums that are fair and directly related to their individual risk profiles.