Illinois Insurance Premiums Under Review: Examining Equitability and Pricing Practices

In an effort to redefine how insurance premiums are calculated for millions of Illinois residents, lawmakers have initiated a pivotal study that could affect pricing practices across the state. House Bill 1234, which received approval from the Illinois House of Representatives on April 8, mandates a comprehensive investigation by the secretary of state. This study aims to scrutinize the key criteria used by insurers, such as ZIP codes, credit scores, and age, to determine whether these factors result in inequitable premium costs for certain demographic groups. The findings of this investigation, expected by January 1, 2026, could potentially alter the landscape of insurance affordability and availability statewide.

The initiative is a response to persistent consumer grievances suggesting that non-driving-related variables unfairly elevate their insurance premiums. Many residents feel unduly burdened by the financial and demographic metrics that influence their insurance costs, arguing that these practices disproportionately impact low-income communities and communities of color. Wandreeka McBride, chief of staff to Representative Rita Mayfield, emphasized the importance of addressing these concerns to foster equity within the insurance industry. McBride noted that further regulation might be necessary to align underwriting practices with principles of fairness and transparency.

While the insurance industry has not contested the necessity of the study, there is contention regarding the secretary of state's role in spearheading the review. Kevin Martin, executive director of the Illinois Insurance Association (IIA), raised concerns about potential biases, noting that the agency has previously supported legislation to ban underwriting factors like credit scores and age. Martin questioned the objectivity of the secretary's office and suggested that academic institutions such as the University of Illinois or Illinois State University, renowned for their expertise in insurance research, should conduct the study. Furthermore, he recommended that the Illinois Department of Insurance, despite acknowledging staffing constraints, should play a crucial role due to its regulatory authority.

The debate surrounding underwriting practices is not confined to Illinois alone. The IIA pointed to a similar case in Washington state, where a temporary prohibition on credit score usage in insurance led to premium hikes for more than 60% of drivers, as reported by AM Best. This ban was ultimately overturned in court, but the IIA cautioned that a comparable outcome could ensue in Illinois should similar restrictions be enforced. This ongoing discourse sparks a larger question: will revising underwriting practices result in fairer premiums, or might it inadvertently heighten consumer costs? These considerations are at the forefront of the dialogue as stakeholders anticipate the study's results and the potential implications for the insurance industry in Illinois.