State Farm’s insurance hikes spark backlash from Pritzker, lawmakers
State Farm?s insurance hikes spark backlash from Pritzker, lawmakers
Illinois-based State Farm Insurance says severe weather is increasing in Illinois, leading to a need for higher insurance rates. But Gov. J.B. Pritzker has one message for the company: prove it.
ILLINOIS - Illinois-based State Farm Insurance says severe weather is increasing in Illinois, leading to a need for higher insurance rates. But Gov. J.B. Pritzker has one message for the company: prove it.
What we know:
Pritzker tweeted that the proposed rate hikes are "arbitrary and unfair," accusing State Farm of shifting out-of-state costs onto Illinois homeowners.
However, State Farm’s website explains that homeowners will pay more than $500 million in increased premiums because the company is paying out more in claims than it receives in premiums and is operating at a loss. The company also cites inflation and a rise in severe weather events such as wind, hail, and tornadoes.
"If they want to raise rates by half a billion dollars – nearly 30 percent increase in one fell swoop - they should have to show their math and justify why ratepayers have to pay these higher rates," said Abe Scarr, head of the Illinois Public Interest Research Group.
Scarr said insurance costs have risen 50% in the last three years. South Suburban Democratic State Sen. Mike Hastings said State Farm misled lawmakers by claiming rates were stabilizing before hiking them.
"The insurance companies are on notice, Paris. Nothing lights a fire under a suburban dad's butt more than being told one thing and then another happens," Hastings said.
Hastings is sponsoring a bill that would prohibit insurers from passing the costs of out-of-state disasters onto Illinois homeowners.
"Whether it's wildfires in California or hurricanes in Florida - that should be explicitly outlawed in the law and its not."
His bill would also require State Farm and other insurers to be transparent about how they calculate their rates before any increase is approved. Scarr said he believes the state Department of Insurance should have the authority to reject or reduce proposed rate hikes.
"At the end of the day they have no ability to change this rate increase right now and we believe that should change," Scarr said.
Additionally, State Farm is increasing out-of-pocket deductibles and decreasing claims payouts, creating a triple whammy for homeowners. Hastings said he will try to advance the bill during this fall’s veto session.