Gov. JB Pritzker renews push for Illinois homeowners’ insurance rate oversight after bill fails in state House

Gov. JB Pritzker on Thursday renewed his call for legislation requiring insurance companies to justify and disclose the reasons behind steep homeowners’ insurance rate hikes — a proposal that stalled in the Illinois House last month despite support from the Democratic-controlled Senate.

Pritzker said the state’s lack of authority over insurers leaves homeowners vulnerable to sharp premium increases, pointing to Bloomington-based State Farm’s decision this summer to raise home insurance rates by more than 27%. The company attributed the increases to extreme weather coupled with costly repairs.

“We’re one of very few states that doesn’t have any limits on what an insurance company can charge,” Pritzker said at an unrelated event in Chicago.

“Increases like 27% in a single year ought to be reviewed by a state regulator, and that’s all we’re asking,” Pritzker continued. “What we want is for the insurance companies simply to show us why it’s appropriate for them to raise rates by 27%. They didn’t do that. They haven’t done that. All they did was say, ‘Well, we had losses.’ … We don’t know if homeowners are being gouged, and that’s what it feels like.”

The bill, which would have allowed the Illinois Department of Insurance to review and potentially challenge excessive or “unfairly discriminatory” rate increases, passed in the Senate 41-15 with a couple of Republicans joining Democrats in favor of the measure. But it fell short in the House, 56-37, four votes shy. Several House Democrats joined Republicans in either not supporting the bill or outright voting against it shortly before the fall legislative session drew to a close late last month.

The legislative defeat marked a rare setback for Pritzker in a General Assembly dominated by Democrats and came despite public pressure from the governor, who in July co-authored a Chicago Tribune op-ed with House Speaker Emanuel “Chris” Welch of Hillside and Senate President Don Harmon of Oak Park that urged State Farm to be more transparent. Also in July, Pritzker separately took to social media to call on the legislature to work on the issue during the fall session.

Welch spokesman Jon Maxson said House leaders expected the bill to have enough support before it was called for a vote.

“A few people must have changed their minds after debate,” Maxson said in an email Thursday. “We will revisit the issue in the spring.”

Among the House Democrats who did not support the bill was state Rep. Thaddeus Jones, who is head of the House Insurance Committee and also mayor of Calumet City.

During the House floor debate in the fall veto session, Jones said the bill failed to address rising auto insurance rates. While Jones didn’t vote ‘no’ on the bill, he urged other lawmakers to vote against it and recommended the bill be pulled from the record “to do it right.”

Jones has received about $20,000 in campaign contributions from insurance interests this year, including $4,000 from a political action committee controlled by State Farm, according to state campaign records. It’s not unusual for chairpersons of industry-related legislative committees to receive campaign contributions from business interests.

“There should be a process that has auto rates. Auto rates (are) number one when it comes to consumer complaints and consumer discrimination,” Jones said. “To hell with what the industry says, we want to protect the consumers.”

An earlier version of the legislation had combined oversight of both homeowners’ and auto insurance rates, but the bill debated during the fall veto session focused only on homeowners’ coverage. It would have required insurers to notify policyholders and the state at least 60 days before imposing premium increases greater than 10%, giving homeowners time to seek alternative coverage.

In the House floor debate, House Majority Leader Robyn Gabel, a Democrat from Evanston, said that facet of the legislation would have allowed consumers to shop for potentially more affordable coverage during the 60-day period.

“There are few feelings more helpless than sitting at the kitchen table, opening an envelope and seeing a bill that could put you out of your house and home. A thousand-dollar, two-thousand-dollar increases, where is that going to come from?” said Gabel, the main House sponsor of the bill. “Homeowners are doing the right thing. It’s time we make sure the insurance companies are doing right by them. This is our job to fight them. It is our job to stand up and say ‘no’ to the big, non-transparent insurance companies and say ‘yes’ to this bill to protect our people.”

State Farm, the state’s largest homeowners’ insurer, argued the legislation would have created a less competitive market and driven up costs.

“Instead of tackling the root of the problem — inflation and more weather-related losses that require increased home and community resilience measures — Governor Pritzker wants to give his appointed insurance commissioner more power to create a less competitive insurance market in Illinois,” spokesperson Gina Morss-Fischer said in a statement. “State Farm supports a competitive insurance market where insurers charge rates that match the risk.”

The insurance giant said this past summer that weather-related losses in other states have taken a toll on its business, including when it received nearly 13,000 claims and paid out more than $4.2 billion to California homeowners who suffered losses during the intense wildfires that spread across the Los Angeles area. In Illinois, the company said it paid out $1.26 in claims for every $1 premium collected from homeowners last year, including $638 million in hail damage claims, second only to Texas.

Last month, Illinois Attorney General Kwame Raoul filed a lawsuit against State Farm, alleging the company has refused to comply with a regulatory examination into its homeowners’ insurance business.

But Morss-Fischer said State Farm has provided actuarial backing for its rate increase.

“Our promise to our customers is to be there after a loss and that means having enough capital to pay for those losses,” Morss-Fischer said. “We don’t like having to raise rates, but we also must be in a position to keep promises to our customers.”

Republican lawmakers said the bill amounted to overregulation.

Rep. Jeff Keicher of Sycamore, a State Farm agent, said it would “turn the industry on its head” without addressing litigation or other costs driving premiums higher.

“We can regulate,” he said, “but not like this.”

On Thursday, Harmon, the Senate president, told the Tribune he was “disappointed it didn’t get over the finish line.”

“Folks reacted very favorably to our efforts, so I trust the House will make another attempt,” he said.

“A lot of moving pieces at the very end,” Harmon said of the bill. “I thought we had taken much of the controversy out of it in the Senate, and that it was in a position to move through the House, but each chamber has its own will.”

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