Editorial: State Farm lowers the homeowners insurance boom on Illinoisans

About a third of homeowners in Illinois are about to experience an increase that will cost them hundreds more annually.

No, we’re not referring to property taxes, although many of those same homeowners are likely to see substantial hikes in those perennial irritants as well. We’re talking about the bombshell news that State Farm, by far the single largest insurer of homes in its home state of Illinois with nearly 33% of the market, is raising its premiums by an average of more than 27%, beginning Aug. 15.

That will cost the average policyholder another $350 annually, the company confirms, although for some the increase will be far more and for others it will be somewhat less.

As if that weren’t painful enough, State Farm for the first time also is imposing a 1% deductible on all losses from wind or hail. That means that if your $500,000 house is destroyed in a tornado, you will have to dig in your pockets for $5,000 before State Farm covers the rest.

That special deductible is in addition to any routine deductibles in your policy — say, $500 or even more on claims for losses due to factors other than wind and hail.

This is by far the single largest homeowners hike ever by State Farm in Illinois — and the steepest one-time increase we can remember from any major insurer here.

State Farm has moved to raise its homeowners insurance premiums by 30% in California, a state far more in the news for weather catastrophes and insurance market turbulence. That State Farm’s hike in Illinois is nearly at California levels raises alarms about changing weather patterns in the heart of the country, as well as the stability of our insurance market.

It also comes — unlike in California, which until recently prevented insurers from substantially increasing their pricing — after years of Illinois homeowners hikes from State Farm and its competitors. Look at your mortgage lately? Property taxes and insurance now account for a considerably larger share of most folks’ monthly home payments, since most mortgage servicers handle collections for insurance and taxes as well as principal and interest.

One-time increases on this order are the sorts of events that provoke consumer anger and get politicians’ attention. And, making matters worse, the public reaction will be something of a slow burn, as State Farm customers see the increases in their bills (and in their mortgage statements) only as their policies renew.

Bloomington-based State Farm, the largest home and auto insurer in the U.S., says it had to act because of more intense and damaging storms in the Midwest. In the past, State Farm has been terse when describing reasons for hiking premiums. This time around, given the magnitude, it was more forthright, saying that last year it incurred $1.26 in claims and other costs for every dollar of homeowners premium collected from Illinoisans. The year before that, State Farm’s home insurance business here was even more unprofitable, paying $1.30 for every premium dollar.

In 2024, State Farm said, Illinois was the source of $638 million in hail damage claims, second in the U.S. only to Texas, which had $1.1 billion.

All of this is helpful information and helps justify this exorbitant increase. All the more reason that Illinois should require insurers to provide such information publicly whenever they move to hike rates above a certain threshold.

Illinois is one of the least restrictive states in the nation when it comes to insurance. Unlike the vast majority of states, insurers here are free to hike their prices without regulatory approval before or after the fact and are required only to inform the regulators when they do so.

With two of the largest insurers of homes and cars in the country headquartered here — State Farm and Northbrook-based Allstate, which each employ thousands of Illinoisans — it’s not all that surprising our state’s regulatory touch is so light. Legislation is pending in Springfield that would require regulatory approval of rate hikes above a certain threshold, which the industry opposes.

State Farm’s whopper of a rate hike may well give that initiative more momentum. Gov. JB Pritzker late Thursday urged action in the fall veto session, calling State Farm’s action “severe and unnecessary.”

We wrote earlier this year in favor of continuing to allow market forces to set the cost of auto and home insurance, even though both are unavoidable costs for most people who own homes and (by law) all people who own cars. The system has served Illinois consumers reasonably well over the decades, and hard-line regulatory approaches have been shown to backfire in other parts of the country, most notably California.

But there’s no excuse now for not imposing greater transparency requirements on insurers, especially as climate change and inflation continue to boost claims costs for State Farm and its smaller peers. When insurers hike rates substantially, they should disclose in an easy-to-find way whether they’re making or losing money in Illinois and by how much.

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