The Illinois General Assembly approved two insurance reform measures that will increase transparency around home and auto insurance rate increases and give state regulators greater authority to review rates before they take effect. Both laws take effect on July 1, 2027.
Senate Bill 714 creates a new state oversight framework for auto insurance rates. House Bill 4273 does the same for homeowners insurance rates. House Bill 4273 does not cover commercial property and liability insurance, rental properties, certain vacant homes, and farm dwellings covered under farm insurance.
Under both measures, insurers must submit rate filings to the Illinois Department of Insurance.
The Department can challenge rates it determines to be excessive (higher than actuarially justified), inadequate (so low as to threaten an insurer’s financial stability), or unfairly discriminatory (premiums that are not reasonably tied to risk or cost) and may require modifications or consumer rebates.
Both bills also require insurers to provide advance notice of significant premium increases. Auto insurers must give at least 30 days’ notice before increasing a renewal premium by more than 10%. Home insurers must give at least 60 days’ notice. Both bills require insurers to use Illinois claims data when setting rates whenever reliable Illinois data is available. The goal is to prevent Illinois policyholders from bearing the cost of insurance losses incurred elsewhere in the country, such as those caused by natural disasters or market conditions in other states.
There was significant debate over this legislation and its impact on insurance premiums. Advocates for the legislation argue that the legislation will lower rates. Insurers disagree. We will see how it all plays out.
One thing to note is that the majority of these reforms do not apply to commercial property or automobiles (with some exceptions). This is certain: the cost of insurance is creating affordability issues for the small business community. We encourage Illinois politicians to explore ways to stabilize insurance costs for small businesses and property owners.