Testimony before the House Insurance Committee in support of HB4767

Chairperson Jones, Vice Chairperson Morgan, Spokesperson Keicher, honorable members of the committee: thank you for the opportunity to testify today. My name is Abraham Scarr and I am the Director of Illinois PIRG. Illinois PIRG is a statewide, citizen funded, non-partisan public interest advocacy organization that speaks out for a healthier, safer world in which we’re freer to pursue our own individual well-being and the common good.

I am speaking today on behalf of the Illinois Coalition for Fair Car Insurance rates, a coalition of 15 consumer, community, and civil rights organizations. We are unified in our support of House Bill 4767, to protect consumers from excessive and unfair car insurance rate hikes. Thank you Representative Guzzardi for your leadership on this issue.

I also want to thank Chairperson Jones for introducing House Bill 4611 and to Secretary Giannoulious for championing it. I look forward to working with the Chairperson, secretary, and members of this committee to make progress toward shared goals. 

HB4767 has two primary policy goals: 

1. empower the Department of Insurance to reject or modify excessive, inadequate, or unfairly discriminatory car insurance rate hikes; and
2. prohibit the use of non-driving rating factors and taking other steps to reduce discriminatory impacts of car insurance rate-setting.

We and our coalition strongly support all aspects of HB4767. My testimony will focus on rate review.

Rate Review

Last summer Gov. Pritzker signed Public Act 103-0106 into law, establishing a rate review process for small group health insurance plans. Last week in his budget address, the governor announced his intention to advance legislation to extend rate review to large group health insurance plans.  We celebrate the governor and general assembly’s recent support for rate review policies in Illinois.

Similar to access to health care, owning a car is essential for many Illinois residents. While we support expanding mobility options beyond personal cars, we recognize that for many, owning a car is necessary to access employment, education, health care and other vital services. Further, similar to the Affordable Care Act’s  health insurance mandate, Illinois law requires that car owners purchase car insurance. 

When government compels individuals to purchase a product, it is important that government also enforce basic cost and quality standards for that product.  Instead, Illinois is one of only two states without some form of rate review for car insurance. The other state, Wyoming, is the least populous state in the nation and trails only Alaska in having the lowest population density. It’s time for Illinois to enact the type of basic consumer protections for state-mandated car insurance that the vast majority of Americans enjoy.

Let me be clear: our position is not that rates should not have gone up at all in recent years. We understand the inflationary pressures have necessitated some level of rate increases. Just as excessive rates are a problem, so are inadequate rates. Consumers benefit from financially sound insurers that can meet their obligations to policyholders. 

Rather, our position is that rate review is a critical consumer protection that can moderate rate increases and better ensure that rates are not excessive, inadequate, or unfairly discriminatory. To illustrate this, compare what happened when rates should have gone down in the first year of the pandemic, compared to how rates have gone up since. 

In the first year of the pandemic, Illinoisans were driving much less, meaning the risks of driving were much lower, even for those still on the road every day. Yet despite this decline in risk, car insurance premiums did not decline in proportion.  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, Geico, Progressive and Allstate — 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. 

Since then, insurance rates in Illinois have shot up through frequent, substantial rate hikes. In January, Illinois PIRG Education Fund released research that found that the 10 largest car insurance companies by Illinois market share raised Illinois drivers’ rates by more than $1.25 billion in 2023. This is the second consecutive year of rate increases of more than a billion dollars. Since 2022, top car insurance companies have raised Illinois rates by almost $2.4 billion.  

Since the start of 2022, Illinois-based State Farm and Allstate have increased rates by $753 million and by $439 million, respectively.

Consider: when it was appropriate to lower rates, the companies dragged their feet and at the end of the day pocketed hundreds of millions of dollars of pandemic windfalls. But when it is appropriate to raise rates, the companies are aggressive in the pace and size of rate hikes. In other states, regulators have used their authority to win greater pandemic refunds and to limit the size of rate hikes since. In Illinois, regulators have no such authority. 

From my experience as a utility advocate, I know that rate regulation is hard and can’t address every industry problem, but also that the simple presence of an active, empowered regulator changes industry behavior and benefits consumers. Moderating the size and pace of rate hikes is something regulation can achieve, and will make a material impact on consumers’ pocketbooks.

Rating factors

Finally, while not the primary focus of my testimony today, we also support ending the unfair practice of using non-driving factors to set rates. Using non-driving factors has demonstrated discriminatory impacts and can lead to absurd outcomes, like drivers with excellent credit but convictions for driving while intoxicated paying less for insurance than excellent drivers with poor credit. Car insurance rates should be based on how you drive, not who you are. 

It is important to also think about what the predominance of non-driving factors in rate-setting communicates to consumers. Ideally, an insurance product informs consumers about risk and encourages behavior that lowers risk, benefiting both that individual consumer and the broader public.  As it stands, one of the most important things a consumer can do to save money on car insurance is to improve their credit score.

Again thank you for the opportunity to testify today. I will be happy to answer any questions from the committee.