Illinois Gov. J.B. Pritzker is pushing for lawmakers to ban “severe and unnecessary rate hikes” after a major insurance company sought a substantial hike.
This week, State Farm revealed that it plans to escalate insurance rates by more than 25% amid what it called an increase in catastrophic weather events.
“Over the last several years, our catastrophe provision has proven to be inadequate when compared to our actual catastrophe loss experience,” State Farm wrote in its filing. “While there is volatility associated with extreme weather events, our Illinois catastrophe losses have exceeded the year’s catastrophe provision in 13 of the last 15 years, signaling the provision used in rating has been insufficient in recent history.”
Pritzker challenged the company’s assertion that extreme weather events within Illinois’ borders were responsible for the rate hike, which could see premiums increase by 27.2% for new and existing customers.
“These increases are predicated on catastrophe loss numbers inconsistent with the Illinois Department of Insurance’s analysis, indicating State Farm is shifting out-of-state costs onto homeowners here,” Pritzker said. “These changes will cost homeowners hundreds of additional dollars per year without a state-based justification or corresponding increases in protection.
State Farm’s filing aims to impose the new premiums on new customers by July 15, and on existing customers by August 15.
“The cost of covering Illinois homeowners’ losses is exceeding the premiums we’re earning—an indication we need to adjust prices,” the company said in its statement, adding that inflation has also played a role.
Pritzker is now calling on lawmakers in Springfield to pass legislation addressing the rate hike, seeking to prevent such extreme increases to take place.
“I am also calling on the General Assembly to enact a legislative solution during the veto session that prevents insurance companies from taking advantage of consumers through severe and unnecessary rate hikes, such as those proposed by State Farm,” he said.
According to State Farm, the company is also introducing a new “Wind/Hail Deductible” aimed at “limiting rising premiums.”
Illinois customers will be required to have a minimum 1% Wind/Hail deductible as part of their policy, which will apply in cases where losses were caused by wind or hail.
“Choosing a higher deductible is one way to reduce the premium you pay for insurance,” the company said.
Pritzker called the hikes “arbitrary” and antithetical to the state’s economic environment and policies.
“Over the past six years, our state economy has flourished based on transparent markets and fair competition. State Farm’s actions are antithetical to the core principles that the Illinois business community is built on,” he said.
The Illinois Department of Insurance is reviewing the filing, saying that it would cause a “large expected impact to consumers.”
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