Editorial: Another steep homeowners insurance rate hike from Allstate. How should Springfield react?

Oh, for the days when insurance rate hikes simply matched inflation.

A few months after State Farm shocked Illinoisans and angered Gov. JB Pritzker with a 27% average rate increase for homeowners insurance, Allstate now will raise average homeowners rates for most policyholders by 9%, according to filings last week with the Illinois Department of Insurance. That increase will take effect in February.

On its face, Allstate’s hike is just a third of State Farm’s shocking increase, at least percentage-wise, but keep in mind that Allstate raised its homeowners premiums by more than 14% on average this past February. Combine those two increases, and Allstate is nearing State Farm territory.

The two combined hikes at Allstate Vehicle & Property Insurance, the unit insuring the majority of Illinois homeowners customers, will total about $42 more a month on average once the new rates kick in, according to filings. For many customers, those amounts are paid as part of their monthly mortgages. Those are substantial increases for homeowners; many are contending too with higher property taxes, especially in Chicago.

Allstate’s two hikes also are more on a dollar basis than the State Farm increase because State Farm’s rates were lower on average than Allstate’s before these most recent rounds of price hikes. State Farm’s action is costing policyholders about $29 more per month on average.

State lawmakers responded in October to State Farm’s action by pushing a Pritzker-backed bill that would have given the Illinois Department of Revenue the authority to disapprove homeowners rate hikes if they were deemed “excessive, inadequate or unfairly discriminatory.” The measure easily passed the Senate and fell just short in the House — a sign of State Farm’s considerable clout in Springfield.

But the issue surely isn’t going away, with more such increases well exceeding inflation, as demonstrated by Allstate.

The industry is regulated state by state, and Illinois has one of the nation’s most lenient regulatory approaches to insurance. Insurers don’t have to win regulatory approval in Illinois to change their pricing, either before or after the fact. Virtually every other state gives its regulators at least some say over rates.

The industry argues that Illinois consumers benefit from the large number of insurers that compete here, in no small part due to the lack of price regulation. For many decades, the industry’s argument has been convincing — Illinois’ insurance rates indeed have been quite competitive compared with other states.

But State Farm and Allstate’s actions are calling that conventional wisdom into question. And the two giants are the most important players in Illinois. Both are based here, employing thousands of Illinoisans each, and State Farm and Allstate between them insure nearly half the homes in the state.

Ann Gillespie, Pritzker’s insurance director, a few months ago raised questions about whether insurers — State Farm in particular — were taking advantage of Illinois’ lack of rate regulation to make up for losses being incurred in other states with stricter approaches. State Farm adamantly denies doing so, but Gillespie complained that State Farm hadn’t adequately responded to department demands for information supporting its assertions. And the state has sued State Farm to compel more disclosure.

In Allstate’s case, its nationwide homeowners insurance business has swung to profitability after several years of price increases. A unit that paid out nearly $1.20 in claims and incurred costs for every dollar of collected premium in the first nine months of 2023 shelled out just 95 cents for every dollar collected during the same period this year, according to investor materials.

Those disclosures don’t separate out performance by state.

“Illinois rates are being driven by the state’s severe weather events and higher repair costs,” an Allstate spokesman tells us.

“While calls for rate regulation may appear politically appealing, it is critically important to appreciate that recent increasing insurance rates in Illinois are a reflection of the risk, rather than the cause,” the industry-supported Insurance Information institute in Washington, D.C., tells us. “Premium increases reflect real, escalating costs, from natural disasters to inflationary pressures to legal system abuse.”

As we’ve said before, we believe the state’s light regulatory touch on insurance largely has served Illinoisans well over these many years. But the industry’s biggest and most visible players aren’t doing themselves any favors right now in Springfield.

We still wouldn’t go as far as Pritzker in responding to homeowners’ affordability issues, but we do think insurers should agree to make their results in Illinois far more transparent, both to regulators and the public. And those provisions should be written into law.

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