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Chicago Tribune
7 days ago
- Business
- Chicago Tribune
Editorial: Gov. Pritzker and State Farm should stop throwing rhetorical bombs at each other and start negotiating
The governor of Illinois and one of the state's biggest employers are engaged in an unusually heated war of words. Shortly after news dropped last week of State Farm's eye-watering 27% average rate hike on Illinois homeowners insurance customers, Gov. JB Pritzker erupted, accusing the Bloomington-based insurance giant of pulling a fast one. 'These increases are predicated on catastrophe 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 of this state,' Pritzker said in a statement. 'Hard working Illinoisans should not be paying more to protect beach houses in Florida.' In the insurance world, those are fighting words. State Farm responded with its own statement saying Pritzker had his facts wrong, and that the insurer's rate hike — as shocking as it was — reflected only its experience in Illinois, where hail and wind storms, combined with higher replacement costs, have made its homeowners business here deeply unprofitable. 'Illinois families deserve an honest conversation about insurance economics rather than political rhetoric.' So what we appear to have now are two powerful forces facing off, each effectively accusing the other of being a liar. Not ideal, to say the least. We understand the governor's frustration. The 27% increase, set to take effect Aug. 15, is the largest such one-time hike in memory in Illinois, and State Farm isn't just any old provider. The largest insurer of homes and cars in the land, State Farm is particularly dominant in its home state. For years, it's insured roughly 1 of every 3 Illinois homes. So when State Farm raises annual premiums by hundreds of dollars in one fell swoop, that could well have a negative impact on the state's economy. State Farm is that big of a player. Consumers already are struggling with inflation of all sorts. Insurance — like utility bills, which also are rising sharply this summer — isn't an avoidable cost. When insurance costs rise this much, many consumers have to tighten other parts of their budgets, which hurts businesses whose products are more discretionary. That's not to say, though, that we approve of the governor lobbing such serious accusations at State Farm without simultaneously releasing to the public the evidence backing up the rhetoric. Pritzker referenced a Department of Insurance analysis supporting his allegation. So far, no one has seen that analysis despite journalists' request for it. Likewise, the reference to 'beach houses in Florida' appears to be something of a cheap shot. In 2023, State Farm's homeowners premiums in Florida were two-thirds of its total premiums in Illinois, according to National Association of Insurance Commissioners data. State Farm's homeowners premiums in Texas were 73% more than in Illinois; they were 55% higher in California. Maybe 'cattle ranches in Texas' don't have the same ring as 'beach houses in Florida?' That stated, State Farm executives had to anticipate that a rate hike of this magnitude would provoke a political backlash. While homeowners have seen their insurance bills rise in recent years, whether they use State Farm or another carrier, few could have expected sticker shock at this level, particularly since Illinois doesn't have the same reputation for weather catastrophes as Florida, Texas or California. In California, where devastating wildfires have been coupled with major insurers' pulling back on doing business in catastrophe-prone areas, State Farm moved to raise homeowners premiums by 30% on average. A judge earlier this year agreed to allow State Farm to raise rates by 17%, and the company intends to seek the full 30% increase that it originally sought through continued negotiations with the state's insurance commissioner. That sort of compromise seems to us a reasonable solution to the standoff in Illinois. State Farm could obtain part of its planned increase — say, 15% — and then potentially impose the remainder if its Illinois results don't improve over the coming year. In return, Pritzker might soften his request for state legislation giving our insurance regulators approval authority over future rate hikes, a power they don't have now, which makes Illinois' insurance industry one of the most lightly regulated in the country. These are simply suggestions. There are other avenues to compromise. The point is that State Farm and Pritzker need each other. State Farm is one of Illinois' largest employers and a critical corporate citizen. Its future in Bloomington, a city whose economy is heavily dependent on State Farm, has been the subject of steady rumors over the past decade as the insurer has expanded operations in Texas. Conversely, Illinois' insurance department is the company's primary regulator. Part of the reason Illinois is home to two of the largest insurers in the U.S. (Allstate being the other) is that it's perceived as a good place to be based. Unlike, say, banking, insurance is regulated state by state; a company's home state takes the lead on ensuring it is operated soundly. A decent relationship between the company and state government is consequently essential. Even when conditions get this stormy, cooler heads need to prevail.
Miami Herald
15-07-2025
- Business
- Miami Herald
State Farm defends hefty 27.2% hike in Illinois homeowners insurance rates
Challenged by everyone from consumer groups to Gov. JB Pritzker over its imminent 27.2% homeowners insurance rate increase in Illinois, State Farm faces the question: Will it seek to defend its widely criticized decision? The answer: hail yes. Citing more frequent extreme weather events such as wind, hail and tornados, insufficient premiums to cover claims and the rising cost of repairs due to inflation, State Farm said its Illinois homeowners business has seen "unsustainable" losses in 13 of the last 15 years. It needs to raise rates to remain "financially strong," the company said in a statement. "These losses are driven in part by severe weather damaging communities across the state," State Farm said. "No company can absorb such losses forever and still be there for customers when disaster strikes." In 2024, for example, State Farm paid out $1.26 in claims for every $1 premium collected from Illinois homeowners, the insurance giant said. That included $638 million in hail damage claims, second only to Texas. The rate increase, first reported by the Tribune last week, has created a political firestorm for Bloomington-based State Farm, the largest home insurer in Illinois. State Farm is raising homeowners insurance rates in Illinois by a whopping 27.2% beginning Aug. 15, according to a filing with the state last month. The rate hike, one of the largest in the state's history, will affect nearly 1.5 million policyholders. New policyholders will pay the higher rates as of Tuesday. In addition, State Farm is implementing a minimum 1% deductible on all wind and hail losses, raising the out-of-pocket costs for homeowners filing a related damage claim. On Thursday, Pritzker issued a statement expressing concern over State Farm's "unfair and arbitrary insurance rate hike," challenging the methodology used to calculate the increased premiums to be paid by Illinois homeowners. Pritzker said the increases are based on catastrophe loss numbers that are inconsistent with the Illinois Department of Insurance's analysis, concluding that State Farm was shifting out-of-state costs onto Illinois homeowners. In its statement, State Farm said it does not shift costs between states and dismissed Pritzker's claims as "political rhetoric." The insurance company said it has provided information to the state to support its position. "Illinois rates are based on Illinois risk - it's as simple as that - not for losses in other states," State Farm spokesperson Gina Morss-Fischer told the Tribune on Monday. State Farm has been hit hard by recent weather-related losses in other states. For example, the insurance company has received nearly 13,000 claims and paid out more than $4.2 billion to California homeowners who suffered losses during the devastating wildfires that raged across the Los Angeles area in January, according to an update posted last week on its website. While State Farm contends that out-of-state losses do not directly affect Illinois premiums, at least one industry analyst said there is a potential connection. If losses are big enough in one state, insurance companies may have to pay more for reinsurance - the insurance company for the insurance companies - resulting in increased rates for policyholders across the country, according to Shannon Martin, an industry analyst for Bankrate. In addition, as people rebuild from wildfires in California to floods in Florida, the increased costs of everything from labor to materials can deplete resources and make it more expensive to do repairs in other parts of the country, including Illinois, Martin said. "You don't operate in a vacuum, and you can't, because we're all part of a risk pool," Martin said. "When there's loss in one area, everyone's going to feel it in some way, shape or form." The increased frequency of extreme weather events has pushed up homeowners insurance rates across the country by 40.4% over the past six years, according to LendingTree's "State of Home Insurance" report for 2025. Illinois had the seventh highest increase, rising 59.5% between 2019 and 2024, the report found. In February, Northbrook-based Allstate raised homeowners insurance rates by 14.3% for nearly 248,000 Illinois customers. Last year, Allstate raised homeowners insurance rates in Illinois by 12.7%, while State Farm implemented a 12.3% increase. State Farm's latest and likely largest-ever Illinois increase has renewed calls for broader legislation to regulate the rates insurers can charge homeowners. Unlike most states, in Illinois, which is home to both State Farm and Allstate, insurers do not need regulatory approval to raise premiums. Legislation is pending in Springfield that would require regulatory approval of larger rate hikes. "It's time for the General Assembly to act," Abe Scarr, director of Illinois PIRG, a nonprofit consumer advocacy organization, said in a statement. "At a minimum, Illinois should empower the state Department of Insurance to reject or modify excessive rate hikes, a basic consumer protection that residents in almost every other state enjoy." At the same time, increased regulation can precipitate companies to abandon markets where it is no longer profitable to insure homes exposed to more frequent weather events. A December report by the Senate Budget Committee said insurance markets have been destabilized from New England to Hawaii as providers decline to renew homeowners policies. "Having more oversight, on one hand, could really help homeowners, but on the other hand, if carriers don't want to be there, that puts homeowners in a pickle," Martin said. "So it's about finding that balance where people can find affordable and available insurance at a rate that insurance companies are satisfied that they're profitable." Illinois ranked 22nd in average annual home insurance costs at $2,743 per year, according to the LendingTree report. For State Farm, the average annual premium for its 1.1 million non-tenant homeowners policies in Illinois is $1,700, which would project an increase of about $475 per year after the 27.2% rate hike goes into effect, the company said Monday. With renters and condo coverage included, State Farm has about 1.5 million total homeowners policies in Illinois. While homeowners rates are going up, State Farm is offering a bit of good news for Illinois customers this week. On Friday, State Farm's auto insurance rates in Illinois will decrease an average of 5.7%, with some customers seeing reductions in premiums of up to 15%, based on lower projected claims costs, the company said. Copyright (C) 2025, Tribune Content Agency, LLC. Portions copyrighted by the respective providers.
Chicago Tribune
14-07-2025
- Business
- Chicago Tribune
State Farm defends hefty 27.2% hike in Illinois homeowners insurance rates
Challenged by everyone from consumer groups to Gov. JB Pritzker over its imminent 27.2% homeowners insurance rate increase in Illinois, State Farm faces the question: Will it seek to defend its widely criticized decision? The answer: hail yes. Citing more frequent extreme weather events such as wind, hail and tornados, insufficient premiums to cover claims and the rising cost of repairs due to inflation, State Farm said its Illinois homeowners business has seen 'unsustainable' losses in 13 of the last 15 years. It needs to raise rates to remain 'financially strong,' the company said in a statement. 'These losses are driven in part by severe weather damaging communities across the state,' State Farm said. 'No company can absorb such losses forever and still be there for customers when disaster strikes.' In 2024, for example, State Farm paid out $1.26 in claims for every $1 premium collected from Illinois homeowners, the insurance giant said. That included $638 million in hail damage claims, second only to Texas. The rate increase, first reported by the Tribune last week, has created a political firestorm for Bloomington-based State Farm, the largest home insurer in Illinois. State Farm is raising homeowners insurance rates in Illinois by a whopping 27.2% beginning Aug. 15, according to a filing with the state last month. The rate hike, one of the largest in the state's history, will affect nearly 1.5 million policyholders. New policyholders will pay the higher rates as of Tuesday. In addition, State Farm is implementing a minimum 1% deductible on all wind and hail losses, raising the out-of-pocket costs for homeowners filing a related damage claim. On Thursday, Pritzker issued a statement expressing concern over State Farm's 'unfair and arbitrary insurance rate hike,' challenging the methodology used to calculate the increased premiums to be paid by Illinois homeowners. Pritzker said the increases are based on catastrophe loss numbers that are inconsistent with the Illinois Department of Insurance's analysis, concluding that State Farm was shifting out-of-state costs onto Illinois homeowners. In its statement, State Farm said it does not shift costs between states and dismissed Pritzker's claims as 'political rhetoric.' The insurance company said it has provided information to the state to support its position. 'Illinois rates are based on Illinois risk — it's as simple as that — not for losses in other states,' State Farm spokesperson Gina Morss-Fischer told the Tribune on Monday. State Farm has been hit hard by recent weather-related losses in other states. For example, the insurance company has received nearly 13,000 claims and paid out more than $4.2 billion to California homeowners who suffered losses during the devastating wildfires that raged across the Los Angeles area in January, according to an update posted last week on its website. While State Farm contends that out-of-state losses do not directly affect Illinois premiums, at least one industry analyst said there is a potential connection. If losses are big enough in one state, insurance companies may have to pay more for reinsurance — the insurance company for the insurance companies — resulting in increased rates for policyholders across the country, according to Shannon Martin, an industry analyst for Bankrate. In addition, as people rebuild from wildfires in California to floods in Florida, the increased costs of everything from labor to materials can deplete resources and make it more expensive to do repairs in other parts of the country, including Illinois, Martin said. 'You don't operate in a vacuum, and you can't, because we're all part of a risk pool,' Martin said. 'When there's loss in one area, everyone's going to feel it in some way, shape or form.' The increased frequency of extreme weather events has pushed up homeowners insurance rates across the country by 40.4% over the past six years, according to LendingTree's 'State of Home Insurance' report for 2025. Illinois had the seventh highest increase, rising 59.5% between 2019 and 2024, the report found. In February, Northbrook-based Allstate raised homeowners insurance rates by 14.3% for nearly 248,000 Illinois customers. Last year, Allstate raised homeowners insurance rates in Illinois by 12.7%, while State Farm implemented a 12.3% increase. State Farm's latest and likely largest-ever Illinois increase has renewed calls for broader legislation to regulate the rates insurers can charge homeowners. Unlike most states, in Illinois, which is home to both State Farm and Allstate, insurers do not need regulatory approval to raise premiums. Legislation is pending in Springfield that would require regulatory approval of larger rate hikes. 'It's time for the General Assembly to act,' Abe Scarr, director of Illinois PIRG, a nonprofit consumer advocacy organization, said in a statement. 'At a minimum, Illinois should empower the state Department of Insurance to reject or modify excessive rate hikes, a basic consumer protection that residents in almost every other state enjoy.' At the same time, increased regulation can precipitate companies to abandon markets where it is no longer profitable to insure homes exposed to more frequent weather events. A December report by the Senate Budget Committee said insurance markets have been destabilized from New England to Hawaii as providers decline to renew homeowners policies. 'Having more oversight, on one hand, could really help homeowners, but on the other hand, if carriers don't want to be there, that puts homeowners in a pickle,' Martin said. 'So it's about finding that balance where people can find affordable and available insurance at a rate that insurance companies are satisfied that they're profitable.' Illinois ranked 22nd in average annual home insurance costs at $2,743 per year, according to the LendingTree report. A 27.2% rate increase would add about $746 per year to that total for Illinois homeowners who have State Farm insurance. While homeowners rates are going up, State Farm is offering a bit of good news for Illinois customers this week. On Friday, State Farm's auto insurance rates in Illinois will decrease an average of 5.7%, with some customers seeing reductions in premiums of up to 15%, based on lower projected claims costs, the company said.
Chicago Tribune
29-01-2025
- Business
- Chicago Tribune
Sen. Michael E. Hastings: We must protect Illinois families from unfair insurance premium hikes
The tragedy of the California wildfires continues to unfold in what will undoubtedly be a long recovery for many homeowners as they navigate the process of rebuilding — and the bureaucracy of their insurance companies. As we've seen even at home in Illinois, none of us is protected from devastation of natural disasters. Yet for insurance companies in our state, steep increases aren't always the result of a flood, tornado or other unexpected events. Illinois homeowners and drivers are increasingly blindsided with unwelcome news from their insurance companies that their homeowner and auto premiums are going up — in some cases, by double-digit percentages. Insurance companies regularly raise their rates, often with no prior insurance claim or other unforeseen event to warrant them. This leaves families scrambling to find extra money they need to cover the increase, posing difficult decisions for those already struggling with the rising costs of everyday living. The General Assembly must prioritize two solutions this spring. The first is the Insurance Rate Fairness and Consumer Protection Act, which would limit excessive rate hikes and protect consumers from arbitrary pricing practices. This bill that I have sponsored would require insurers to seek approval from the Illinois Department of Insurance before raising premiums. If the department does not approve the increase within 60 days, the insurer cannot implement the hike. Additionally, rate increases will be capped at 15% per year, unless the insurer can provide exceptional justification — such as increased claims from natural disasters or changes in the regulatory landscape. It would also prohibit insurers from considering factors that aren't relevant, such as credit score, occupation or education level, when setting auto insurance rates, ensuring that premiums are based solely on factors that directly relate to the coverage being provided. Homeowners insurance rates would also be restricted to factors directly related to the property itself, such as location, age and condition. By removing these nonrelevant factors, we could create a more equitable insurance market that doesn't penalize consumers for things beyond their control. If an insurer attempts to implement an unapproved rate increase, the bill would ensure policyholders are entitled to a refund of the overpaid premiums, plus an additional 25% compensation. Insurers that violate the rules would face substantial fines, and the Department of Insurance would have the authority to take corrective actions to protect consumers. Another bill, the Insurance Rate Transparency Act, would ensure consumers are fully informed about the cost of their insurance policies before they are forced to renew to address the many people who are caught unaware until their renewal notices arrive with dramatic premium increases. The bill would require transparency so that consumers can shop around for the best deal when faced with rising costs. Insurance companies would be required to publicly disclose year-over-year premium rate changes on their websites, a clear summary in all renewal notices, percentage increases (or decreases) in premiums for the last five years and a breakdown of what contributed to those changes. In addition, insurers would need to explain why rates have gone up or down, making it easier to understand the factors at play. These pieces of legislation aren't just about regulating an industry — they're about protecting working people. When homeowners and drivers see their premiums jump by large amounts with no explanation or justification, they are left vulnerable and confused. For many, insurance is a nonnegotiable necessity, but it shouldn't come at the expense of putting food on the table or paying for medicine. Illinois families should no longer be left in the dark about rate changes, nor be at the mercy of arbitrary and excessive price hikes. It's time for Illinois to lead the way in protecting consumers from the growing financial burden of insurance rate increases.
