A bill proposed by an Illinois lawmaker this week would prohibit auto insurers from setting rates based on credit score, race and sex among other criteria, an action that the insurance industry says would drive down competition and increase rates.
House Bill 2203, introduced Tuesday by Rep. Will Guzzardi, D-Chicago, would also give the state insurance department more control in rejecting or modifying rate hikes. The legislation was proposed on behalf of the Illinois Public Interest Research Group (PIRG), which claims auto insurers are reaping in profits by raising rates on consumers.
“While families in my district are struggling to meet rising costs of living across the board, insurance companies are making staggering profits and CEOs are making eight-figure salaries,” said Rep. Guzzardi in a statement put out by PIRG.
The American Property Casualty Insurance Association (APCIA) criticized the bill, saying it will lead to a one-size-fits-all approach to pricing, which will eliminate marketplace competition and ultimately drive up auto prices.
“The Illinois bill limiting insurers’ ability to use proven factors in setting rates, to put it simply, is bad public policy,” the APCIA said in a statement. “To enforce the provisions of this legislation a massively expanded state bureaucracy to carry out these regulations will be necessary, the cost of which is also borne by consumers. The legislation will have exactly the opposite effect that the proponents seek.”
To enact stricter regulation on auto insurers, the Illinois Department of Illinois (IDOI) would need to significantly increase staffing. The proposed legislation would grow the department’s budget by assessing insurers a fee of 0.05% of their total earned premium from the prior calendar year. The fee would be payable to the IDOI no later than July 1 of each calendar year and shall be used by the department to implement the provisions.
A source told Insurance Journal that the department currently employs two actuaries.
Brett Gerger, director of education and agency resources at Independent Insurance Agents of Illinois, said “IIA of IL’s fear is that this added burden of regulation will create the need for many additional employees with highly skilled education requirements. These employees (actuaries) will be a challenge for the Department to even hire, let alone train and implement this new level of regulation.”
Opponents of the legislation say the bill is ineffective in addressing Illinois auto insurance rates, which the APCIA said are significantly lower than comparably sized prior approval states.
“Now is not the time to enact legislation that could result in increased premiums for consumers,” the APCIA said. “This type of legislation could have serious negative consequences for many Illinois drivers, not to mention the state’s auto insurance market, which is currently healthy and competitive.”
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