Changes could cause insurance rate hikes

Several bills proposed this legislative session are seeking to ban certain factors that insurance companies use to set fair and accurate insurance pricing for customers. The bills would ban the use of credit-based insurance scores, ZIP codes, age and gender in insurance pricing. These proposed bans on insurance rating factors may sound good in theory, but the reality is that such bans could cause insurance rates to rise for the majority of consumers.

Case in point: When the use of credit was banned in Washington in 2021, more than 60% of Washington drivers saw an increase in their insurance premiums. Should legislation pass in Illinois that bans credit as a rating factor, many Illinoisans could likely see a similar increase and people with better-than-average credit would bear the brunt of it. Extensive research has proven the use of credit helps many consumers save money on their insurance policies. It is a fact that more than 70% of Americans actually have good credit, so eliminating its use to calculate risk unfairly spreads that risk to everyone, increasing our costs.

Illinois currently owns bragging rights as a competitive auto and property insurance market. Unlike some other states, Illinois consumers have many choices when selecting an insurance company that best fits their needs. While some policyholders may be experiencing insurance premium increases — driven by the rising costs of materials used to repair damaged cars and property, higher labor costs and more frequent natural disasters — the cost of insurance in Illinois remains below the national average. Proposed legislation advanced under the guise of consumer protections ignores the experiences in other states and it is not fair to the majority of people with good credit who could end up paying more for insurance protection.

Lynne McChristian, Director

Office of Risk Management & Insurance Research

University of Illinois Urbana-Champaign