Illinois bill looks to stop car insurance from using consumer information to set rates

[February 27, 2024]  By Catrina Petersen | The Center Square

(The Center Square) – Illinois Secretary of State Alexi Giannoulias is in support of proposed legislation that aims to prevent insurance companies from using consumer information, like a person's race, to set what he said are discriminatory auto insurance rates.

During an Illinois House Insurance Committee hearing in Chicago Monday, Giannoulias said an individual’s driving record should serve as the primary factor that is analyzed when setting rates.

"I am sure you will hear from the other side today, who will predict that this legislation [House Bill 4611] will lead to rate hikes and job losses, but I implore all of you to look at the numbers and facts,” Giannoulias said. “I do feel it is important for us to step up and fight for those who don’t always have a voice fighting for them. We aren’t asking insurance companies to give Illinoisans special treatment, only fair treatment.”

State Rep. Jeff Keicher, R-Sycamore, pressed Giannoulias and asked him if he knew that there are already laws that prevent companies from discriminating against consumers.

"Is that effective? Is it working? Because based on the data we have seen there are still differing rates depending on zip code,” Giannoulias said.

“I expect a more thought-out discussion with the Department of Insurance would have revealed some of that information, but that didn’t happen,” Keicher said.

Giannoulias said the Illinois Insurance Code broadly prohibits discrimination, but it includes an exception that allows discrimination that is based on “sound actuarial principles.” Auto insurance companies' advocates say gathering the most accurate data is the most fair.

State Rep. Thaddeus Jones, D-South Holland, said his bill is not going to raise taxes.

State Rep. Will Guzzardi, D-Chicago, said the legislature should sacrifice accuracy in spirit of fairness and posed a hypothetical question to auto insurance experts.

“Let’s say there was a rating factor that made our pricing system 1% more accurate but at the same time doubled the rates on Black drivers? Would that be a factor we should use?” Guzzardi asked.

Insurance experts said if an insurance company cannot use the data that helps match that accuracy it brings uncertainty into pricing.

“That uncertainty has a tendency to want to charge more because you don’t know what precisely you are covering,” said Lynne McChristian, director of the Office of Risk Management and Insurance Research at the University of Illinois School Gies College of Business.

Auto insurance premiums are up 26% nationally this year, but rates in Illinois are rising even faster. Statewide premiums are up 28%.

McChristian said the cost of repairs keeps going up so the cost of insurance goes up.

"The prices for motor vehicle parts have gone up by 40%, repairs are going up over 21% and used car values have gone up a lot in the last five years,” said McChristian. “Those are factors that are influencing the cost of auto insurance.”

Giannoulias said he is supporting Jones' bill not because it’ll address high auto insurance rates, but rather the legislation will address companies using consumer information collected from outside data and algorithms.

"The purpose of this bill and my testimony is to make sure rates are based on driving records,” Giannoulias said.

Last week in his budget address, Gov. J.B. Pritzker announced his intention to advance legislation to extend rate review to large group health insurance plans. Illinois is one of two states without a rate review policy for auto insurance. The other state is Wyoming.

Guzzardi's House Bill 4767, which would bring about rate review for auto insurance in Illinois, was also discussed during Monday's hearing.

“Rate review can moderate rate increases and better ensure that rates are not excessive or unfairly discriminatory,” said Abe Scarr, director of Illinois PIRG and is the PIRG Energy and Utilities Program director.

Scarr said in an answer to Keicher that implementing a rate review through the Illinois Department of Insurance wouldn’t come at a cost to taxpayers but rather a “small” fee would be applied to those who write insurance policies for automobiles.