Insurance industry opposes regulation, blames inflation, climate change
for rate hikes
[August 22, 2025]
By Peter Hancock
Insurance industry officials defended recent homeowners insurance rate
spikes this week, blaming such factors as inflation and climate change
while warning that attempts to regulate their ability to set rates would
be bad for consumers.
In testimony during a virtual meeting Wednesday of the Senate Insurance
Committee, officials pushed back against criticisms by Gov. JB Pritzker
and legislative leaders who said the hikes raise suspicions that
Illinois homeowners are being charged extra to help cover insurance
losses caused by wildfires, hurricanes and other natural disasters
elsewhere in the country.
Robert Gordon, a senior vice president at the American Property Casualty
Insurance Association, said property losses from natural disasters are
common in Illinois, and they have been growing more frequent.
“Chicago is the most at-risk of any major city for severe convective
storms,” he said. “That’s storms like thunderstorms, hail, tornadoes. …
Both the average annual losses and the number of billion-dollar-plus
disasters in Illinois has dramatically increased over the last several
years.”
Calls for regulation
In July, Pritzker called on lawmakers to pass legislation in the
upcoming fall veto session that would give the Illinois Department of
Insurance regulatory authority over the rates companies charge for
homeowners insurance.
That came after one of the largest insurers in the Illinois market,
Bloomington-based State Farm Insurance, announced it was raising
premiums for residential property casualty insurance in Illinois by an
average 27.2%.
“These increases are predicated on catastrophe loss numbers that are
entirely inconsistent with the Illinois Department of Insurance’s own
analysis — indicating that State Farm is shifting out-of-state costs
onto the homeowners in our state,” Pritzker said in a statement.
“Hard-working Illinoisans should not be paying more to protect beach
houses in Florida.”
State Farm disputed that claim, saying the rate increases were the
direct result of property insurance losses in Illinois. It noted the
company had lost money in its homeowners’ line of business in 13 of the
last 15 years.
But State Farm’s action also highlighted the fact that Illinois is the
only state in the nation whose insurance regulators do not have
authority to review and either approve, modify or reject proposed
premium changes in the homeowners insurance market. Only in recent years
has the General Assembly given the department regulatory authority over
health insurance premiums.
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A 2023 storm caused extensive home damage in parts of Springfield,
including trees falling on homes. (Capitol News Illinois photo by
Jerry Nowicki)
‘Competition’ as a regulator
Nat Shapo, a former director of the Illinois Department of Insurance
under former Gov. George Ryan from 1999 to 2003 who is now an attorney
in private practice, testified that the primary job of state regulators
should be to make sure insurance companies remain solvent, not to put
caps on the premiums they charge.
“That’s because the greatest harm to policyholders that your
constituents is when a carrier can’t pay their claims,” he said.
Instead of regulating premiums, Shapo said, Illinois has traditionally
relied on market competition to keep rates affordable while regulators
have focused on making sure the premiums companies charge are sufficient
to provide them with enough capital to pay claims.
He said regulating premiums in a way that inhibits companies from
adapting to changing circumstances often results in driving some
carriers out of the market, thereby weakening competition and raising
prices for consumers even further.
“For 50 years since the market became competitive, (Illinois) has used
competition, the most ruthless regulator of price, to regulate insurance
rates,” Shapo said. “The results have been very good.”
Sen. Julie Morrison, D-Lake Forest, who chairs the committee, said
Wednesday’s hearing was for informational purposes only. She said more
hearings will be held before the committee considers any legislation,
but she did not indicate when the next hearing would be.
Capitol News Illinois is
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coverage to hundreds of news outlets statewide. It is funded primarily
by the Illinois Press Foundation and the Robert R. McCormick Foundation.
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