What factors are targeted by the Motor Vehicle Insurance Fairness Act in Illinois?
Having car insurance is a state law, but with the ongoing rising rates more people find it hard to find affordable insurance policies.
In 2023, car insurance rates increased an average of $144 per person with the top five insurance companies.
Those increases especially affect low-income drivers and drivers of Color. A new bill, called the Motor Vehicle Insurance Fairness Act, is groundbreaking.
It is designed to limit car insurance underwriting and rating practices that rely on nondriving factors. The bill enhances the Illinois Department of Insurance’s authority to reject or modify rate increases.
It seeks to prohibit insurance companies from denying or renewing personal car policies based on factors such as credit scores, marital status, race, religion, and more.
Moreover, it requires insurers to demonstrate that their practices and algorithms do not disproportionately impact any specific group based on protected characteristics.
How are consumer advocacy groups responding to the rising car insurance rates in Illinois?
Consumer advocacy groups champion the reforms. The Motor Vehicle Insurance Fairness Act has gained strong support from consumer advocacy organizations such as the Illinois Public Interest Research Group (PIRG).
Their report revealed that car insurers in Illinois garnered $896 million in excessive profits during 2020 and raised rates by over $1.1 billion in 2022 alone.
Until the new bill, Illinois was one of the few states lacking sufficient safeguards against excessive or unfair rates, with car insurance rates in the state soaring by 18% last year.
Forty-eight other states already had mechanisms reviewing increases in place. State Representative Will Guzzardi continues to emphasize the need to protect consumers and put an end to discriminatory practices in insurance rate-setting.
What concerns does the insurance industry have regarding the Motor Vehicle Insurance Fairness Act?
While consumer advocacy groups champion the Motor Vehicle Insurance Fairness Act, industry trade associations caution against the potential consequences.
They voice concerns over its potential ramifications. The National Association of Mutual Insurance Companies, American Property Casualty Insurance Association, and the Illinois Insurance Association jointly criticize the bill, arguing that it could harm consumers, reduce competition, and lead to increased litigation.
These trade groups contend that utilizing risk factors is essential for pricing accuracy and promoting competition, as evidenced by Illinois’ highly competitive car insurance market.
They caution that eliminating risk factors will result in a one-size-fits-all approach, driving up prices for all consumers.