Giannoulias launches campaign to ensure fairness in auto insurance rates
Citing a “rigged system,” Illinois Secretary of State Alexi Giannoulias has launched a campaign to reform auto insurance rate-making, which he said discriminates against seniors and low-income residents.
Auto insurance companies use a number of factors to determine premiums, including several unrelated to driving records, Giannoulias said Wednesday at a briefing with state lawmakers in Chicago.
“The horrible, hard truth is that insurance companies charge you more for auto insurance based on your credit rating, the neighborhood you live in and your age. It really doesn’t matter that you’re a safe driver,” he said.
“Policies based on credit rating and ZIP code disproportionately impact people with lower incomes and people of color.”
Giannoulias is asking individuals to share their experiences on the ilsos.gov/special/driving_change/home website and will host a series of townhalls.
The intent is to create public pressure to enact legislation that would remove socioeconomic factors from being used in calculating rates and provide a more transparent system, he explained.
“An Illinois driver with good credit and a DUI will get a lower premium than a driver with poor credit and no DUI. Safe drivers with a poor credit score pay a whopping $850 more annually than a driver with a DUI,” Giannoulias said, citing state studies.
The initiative comes after Bloomington-based State Farm Fire and Casualty Company announced in early July it was raising premiums for homeowners’ insurance in Illinois by an average of 27.2%.
Democratic state Sen. Ram Villivalam of Chicago and state Rep. Rita Mayfield of Waukegan said previous attempts to revamp insurance practices failed because of industry lobbying.
“Every time we present a bill, they flock down, and they hire all these contract lobbyists and they come after these bills with a vengeance, and they provide misinformation,” Mayfield said.
However, State Farm recently announced auto insurance rates in Illinois will decrease an average of 5.7%, with some customers seeing reductions in premiums of up to 15%, said spokeswoman Gina Morss-Fischer.
“This decision was driven by trends projecting lower claims costs,” she added.
But “older drivers in Illinois are the safest drivers, and their auto insurance rates should reflect this,” said Philippe Largent said, state director for AARP Illinois.
“We look forward to working with (Giannoulias), the insurance industry and the General Assembly to develop criteria that ensures Illinois’ safe drivers are not penalized for non-driving related factors,” he added. “They deserve rates that are as low and fair as possible.”
Meanwhile, insurance industry leaders said in a statement that insurers are not permitted to use and do not use factors like race, income, religion or ethnicity in setting rates.
“This is true in Illinois and in every state,” officials with the Illinois Insurance Association, American Property Casualty Insurance Association and National Association of Mutual Insurance Companies said.
“Illinois insurers fully support transparency in pricing and look forward to continue working with stakeholders to further advance that effort,” the statement reads. “We oppose efforts to limit the actuarial process that has driven companies out of other large states and led to increased premiums for the majority of policy holders.”