New analysis: Illinois car insurance rates hiked by more than $500 million halfway through 2023

Illinois House Insurance Committee holds hearing on legislation to stop unfair, excessive rate increases

The five largest car insurance companies, representing 62% of the state market, have raised Illinois drivers’ rates by more than $500 million halfway through 2023, according to an analysis released Tuesday by Illinois PIRG and the Consumer Federation of America. The total increase amount is even higher; smaller insurance companies have also raised rates in 2023. This follows more than $1.1 billion in similar hikes in 2022.

The new analysis was announced during an Illinois House Insurance Committee hearing, where lawmakers heard testimony on legislation that would protect Illinois drivers from excessive and unfair car insurance rates. The proposed legislation, HB 2203, sponsored by state Rep. Will Guzzardi (39th District), would empower the Illinois Department of Insurance to reject or modify excessive rate hikes, and end the use of non-driving factors, such as credit scores, to set rates. 

“I’m glad that we had the opportunity to put these egregious practices on the record in today’s hearing,” said Rep. Guzzardi. “The recent rate hikes have been staggering, and consumers deserve protections from predatory and discriminatory rate-setting.”

Even though Illinois requires every car owner to buy insurance, it is one of only two states that doesn’t protect insurance customers from excessive or unfair rates. Average Illinois car insurance rates increased by 18% in 2022, more than in all but one other state, according to an analysis by Auto Insurance Report. 

Illinois-based insurers State Farm and Allstate have raised rates by the highest amounts. Their combined rate increases alone amount to more than $1 billion from January 2022 through June 2023.

Car insurers commonly use non-driving factors such as credit scores or zip codes when setting rates. This practice has well-documented discriminatory impacts. A 2017 ProPublica investigation found insurers charging 30% higher car insurance rates in majority Black zip codes compared to other areas with similar accident costs. Car insurers’ use of non-driving factors also leads to absurd results. According to a Consumer Reports analysis, an Illinois driver with a clean driving record but poor credit will pay $862 more annually for car insurance than a driver with excellent credit and a conviction for driving while intoxicated.

“For far too long, Illinois consumers have been paying unfairly high premiums that are unrelated to how risky they are to insure,” said Michael DeLong, a research and advocacy associate with Consumer Federation of America. “Your auto insurance premium should be based on your driving record, not your education level or your credit score.” 

The aggressive 2022 and 2023 auto insurance rate hikes came after insurers overcharged customers during the first year of the COVID-19 pandemic. According to analysis of data released by the Illinois Department of Insurance in June 2022, the top four car insurance companies by Illinois market share — State Farm, Allstate, Progressive and Geico — made roughly $500 million more in 2020 than they would have needed to maintain 2019 profit levels. 

Responding to public pressure, the companies collectively returned about $220 million to customers in 2020. But those four companies alone still raked in a $280 million pandemic windfall. An earlier analysis by the Consumer Federation of America, which reviewed the entire Illinois auto insurance market, estimated insurers’ total 2020 post-refund Illinois windfall at $896 million, or $99 per policy holder on average.

Rate hikes are likely to continue in the second half of 2023. In December, the Allstate CEO, in reference to company plans to continue raising rates, said, “”We may end up overshooting a bit, don’t know.” 

“It’s time to stop allowing car insurers to ‘overshoot’ with excessive rate hikes,” said Illinois PIRG Director Abe Scarr. “Illinois’ car insurance customers deserve the same basic consumer protections most Americans take for granted.”