Insurers Respond to False Allegations Made by PIRG, New Rating Law Proposal in Illinois
The National Association of Mutual Insurance Companies, American Property Casualty Insurance Association, and the Illinois Insurance Association released the following statement in response to HB2203 otherwise known as the rate regulation bill.
“The Illinois bill limiting insurers’ ability to use proven factors in setting rates, to put it simply, is bad public policy. This bill is a combination of prohibitions and requirements that will harm consumers, reduce competition, and increase litigation. 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.
“Changing Illinois’ rating law will not change the economics or crash statistics that drive the cost of insurance in the state. Illinois’ current insurance rating law has benefited consumers since it was implemented in the 1970s. Illinois has one of the most competitive insurance markets in the country and that has helped to keep costs below the national average for consumers.
“With fatal accidents and crashes nearly equaling five-year highs in Illinois, skyrocketing inflation and supply chain challenges, auto insurance costs continue to climb in 2022. When the costs associated with insurance, such as crashes, medical and legal costs rise insurance must reflect the costs for the goods and services it pays for.
“Allegations by PIRG for additional auto insurance premium reductions displays a lack of understanding of how auto insurance pricing works. In fact, the report cited is misleading, ignores the big picture, and fails to acknowledge a system that has historically served Illinois consumers well. The bill’s supporters conveniently overlook gruesome road safety data from recent years and instead use formulas untethered from facts to calculate alleged “windfalls” to validate this proposal.
“Some activist groups only focus on the short-term period when driving declined, but it is important for stable and accurate insurance pricing to do what insurers and most regulators have always done and look at the long-term patterns impacting driving and loss trends. The volatility of always responding to short-term trends would create instability both for consumers and insurers. This could mean wild price fluctuations for consumers and the inability to count on price stability for budgeting purposes.
Insurers are opposed to provisions in HB 2203 that would restrict rating and underwriting tools that have been proven to benefit consumers and are accurate and effective in setting fair insurance rates. By using the variety of rating factors currently in use, insurers can assess drivers’ risks more accurately and price their product based on the likelihood and severity of insurance claims. The use of these tools benefits consumers and is the fairest way to set Insurance rates.
“The bill claims to seek insurance accountability and fairness. Yet, if insurers are unable to utilize risk factors when determining rates, it will lead to a one-size-fits-all approach to pricing, eliminating competition in the marketplace, and ultimately driving prices up for all consumers. As prices increase for all Illinois consumers, access and affordability will steeply decline.
“There are about 230 companies offering personal auto insurance in this state, and through this very competitive environment, no one insurance company or group dominates the market. This provides consumers with a wide array of auto insurance products and services to choose, and the competition means if a company prices their product too high, consumers can purchase their insurance from another carrier.
“This serves to keep costs lower for consumers. Illinois’ insurance rates are in the middle third of the nation and 15.5% lower than the countrywide average and they are significantly lower than comparably sized prior approval states. Insurance rates are first and foremost a function of claims and their costs. As these costs fluctuate with market forces, the imposition of price controls through a pre-approval regulatory system may prove more harmful than helpful to consumers.
“Now is not the time to enact legislation that could result in increased premiums for consumers. 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.”
About:
The National Association of Mutual Insurance Companies consists of more than 1,500 member companies, including seven of the top 10 property/casualty insurers in the United States. The association supports local and regional mutual insurance companies on main streets across America as well as many of the country’s largest national insurers. NAMIC member companies write $357 billion in annual premiums and represent 69 percent of homeowners, 56 percent of automobile, and 31 percent of the business insurance markets.
The American Property Casualty Insurance Association is the primary national trade association for home, auto, and business insurers. APCIA promotes and protects the viability of private competition for the benefit of consumers and insurers, with a legacy dating back 150 years. APCIA members represent all sizes, structures, and regions—protecting families, communities, and businesses in the U.S. and across the globe.
The Illinois Insurance Association is a state trade association for property casualty insurance companies of all sizes operating in this state. The IIA strives to preserve a positive, competitive legislation and regulatory climate that responsibly serves the needs of Illinois consumers.
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Article Posted: 02.08.23
Last Updated: 02.08.23
