Illinois Department of Insurance requests data from car insurers on overcharges during the pandemic

Request comes in response to letter sent from consumer advocates and state senators

Illinois PIRG Education Fund

The Illinois Department of Insurance called on auto insurers Wednesday to provide detailed data that will allow for greater understanding on how much insurance companies overcharged Illinois drivers during the first year of the COVID-19 pandemic. The “data call” comes in response to a letter sent by 16 state senators and nine advocacy organizations in January. Insurers will have through May 15 to respond, and the information will be made public by the end of June.

“We applaud the Department of Insurance and Pritzker administration for today’s action,” said Illinois PIRG Education Fund Director Abe Scarr. “If the data show, as we expect, that insurers made windfall profits during the pandemic, we’ll call on them to issue additional customer refunds.”

In 2020, auto insurers across the country earned massive profits as Americans drove fewer miles while “sheltering in place” and working from home, which meant fewer vehicle crashes and auto insurance claims. In response to public pressure, most insurers provided some refund or credit to consumers. However, the Consumer Federation of America (CFA) estimates that insurance companies could still owe Illinois car insurance customers $896 million in pandemic relief. 

“As chief sponsor and primary advocate for a number of consumer protection measures, it has long been my mission to prevent predatory business practices impacting the hardworking and historically disadvantaged individuals within our communities,” said state Senator Jacqueline Collins. “The Illinois Department of Insurance has shown its commitment to bettering our financial systems and defending the wellbeing of policyholders, and for that I am grateful. However, there is still much work that needs to be done if we are to effectively and successfully preserve public interests.”

The CFA analysis of insurers’ 2020 premium and claims results found that insurers obtained $42 billion in excess premiums while refunding only $13 billion — meaning they overcharged consumers $29 billion. In effect, insurance companies shortchanged their customers by an average of $125 per insured vehicle nationwide.

“This data call is a good first step, although much work remains to be done,” said Michael DeLong, a Research and Advocacy Associate with Consumer Federation of America. “Insurers raked in massive profits during the pandemic, while many consumers were struggling to make ends meet. And they only gave back limited amounts, using the rest of those profits to enrich their shareholders and CEOs.”

The California, New Mexico and Washington Departments of Insurance have issued similar data calls to more fully assess the impact of mileage reductions on the exposure to risk of loss during the pandemic. 

California further directed the insurers Allstate, Mercury, and CSAA to refund excess premiums to California drivers or face legal action, a power the Illinois Department of Insurance does not have. In fact, Illinois is one of only two states whose auto insurance regulators have no power to reject or modify rate hikes. Illinois law also does not prohibit “excessive” rates like most states do.

“Illinois has among the weakest auto insurance rate consumer protections in the country, so we appreciate regulators exercising the authority they do have,” said Scarr. “We look forward to working with the Department and Illinois policymakers to improve auto insurance consumer protections going forward.”