Consumer groups are backing an Illinois bill that would stop insurers from “excessive” auto insurance hikes and prevent insurers from discriminatory practices.

The Motor Vehicle Insurance Fairness Act, HB 2203, was filed this week. It aims to give the state and its constituents more control over policy increases and would ban insurance companies from using non-driving factors when setting rates.

“It’s time for the legislature to protect Illinois consumers and ensure fairness in our car insurance market,” said Rep. Will Guzzardi (D-Chicago), bill co-sponsor. “Discrimination is wrong, profiteering is wrong, and this bill will put an end to those practices in insurance rate-setting in Illinois.”

The bill is backed by a coalition of 15 consumer, community and civil rights organizations, including the Public Interest Working Group (PIWG).

Abe Scarr, Illinois director of the PIWG, said the campaign began when he read a news article detailing the profits insurers made during the pandemic. When researching that issue, he said a bigger problem emerged.

“It was clear to me that Illinois was in dire need of reform–particularly around rate review,” Scarr told Repairer Driven News. “That is what motivates me to work on this issue. For our coalition partners, I think different groups have different motivations, including among the consumer groups, but I would generally say that consumer groups see this as one more way that consumers are taken advantage of in the marketplace, and some groups are particularly interested in the racial wealth gap and how discriminatory practices in the industry contribute to that.”

The Consumer Federation of America is among the bill’s other supporters. Michael DeLong, research and advocacy advocate for the non-profit, said rising insurance rates could be especially detrimental to low-income drivers.

“We’re looking around and we think it’s pretty plausible that financially vulnerable consumers are increasingly adopting deductibles and dropping comp and collision coverage altogether,” DeLong told RDN. “A lot of the rate hikes that we’re seeing are coming in comprehensive collision coverage, so we think it’s likely that drivers are adopting more of the risk, paying for more repairs or in relatively extreme cases, perhaps not even repairing their vehicles if they can get by without doing so.”

If passed, the legislation would require every insurance company doing business in Illinois to prove that its business practices “do not disparately impact any group of customers based on race, religion, gender, sexual orientation, disability or gender expression.

Driver discrimination?

Ensuring drivers are treated fairly is another element driving DeLong’s advocacy.

“We think, for instance, that auto insurance companies’ use of social economic factors like credit information, education, occupation, is very harmful and it should be banned,” DeLong said. “Our studies have found that people with poor credit can often have to pay twice as much–or even sometimes three times as much–for auto insurance compared to people with excellent credit, even if in both categories people have perfect driving records. We don’t think that’s fair at all.

“Auto insurers will try to claim that credit information is a good predictor of risk, but they haven’t really produced much evidence to support that. And people can have poor credit for a variety of reasons. They could be irresponsible, but they could also have gone through a medical crisis that wiped off the credit and their savings. They could have been unemployed through no fault of their own, and that affects their ability to pay bills and therefore their credit. So we hope that those factors will be banned.”

Bill co-sponsor Sen. Javier Cervantes (D-Cook County) said the legislation would prevent any further auto insurance discrimination from happening in Illinois.

“When taking my oath for office, I had a very clear agenda to protect my constituents and HB 2203 does exactly that,” he said. “It ensures that our communities and its people get treated fairly by eliminating geo social parameters to determine insurance rates.”

No oversight in place

Illinois lawmakers have been working to cap insurance rates for years.

As it stands, it is one of just two states that does not have the authority to approve or deny auto insurance rate increases.

“It’s time to stop allowing car insurers to ‘overshoot’ with excessive rate hikes,” Scarr said. “Illinois’ car insurance customers deserve the same basic consumer protections most Americans take for granted.”

Georgia legislators are making a similar push to cap auto insurance spikes.

A proposed bill introduced in that state’s legislature aims to close a loophole in existing legislation that allowed some insurance companies to bypass the state in raising rates up to 40% in a single year, bill proponents said.

It’s not likely drivers will see much financial relief in their insurance policies, with Allstate saying it will modify claims and increase premiums this year to offset the rising cost of doing business.

Images:

The Illinois Capitol is shown. (benkrut/iStock)

Rep. Will Guzzardi (Illinois House Democrats)