Fight over COVID auto insurance data could set off broader regulatory fight in Illinois

A consumer advocacy group says newly revealed data shows that auto insurers made excessive profits during the pandemic — and that it’s proof that Illinois needs to regulate the industry more tightly.

Insurers have fought back against the release of COVID-era auto premium data, which was requested by a coalition of consumer groups and state lawmakers. They wanted to know how insurers were making money when people started driving less because of COVID. The insurers — speaking through their trade groups — said the Illinois Department of Insurance’s request for the data was “neither supported nor sanctioned by law or regulation.”

In the end, the insurers obliged and the data was released on July 1.

“This basically confirmed what we already knew: When you look at the premiums that these insurance companies have taken and compare it to their losses and compare 2020 to 2019, they made big windfalls,” said Abe Scarr, director of Illinois PIRG (Public Interest Research Group). “Much higher than they would need in terms of profit just to stay where they were in 2019, which was a very profitable year by the way.”

Illinois PIRG says preliminary analysis shows “insurance companies could still owe Illinois auto insurance customers $896 million in pandemic relief.” Looking at Bloomington-based State Farm and the three other largest companies, Illinois PIRG says they “charged their customers $280 million more than was necessary to maintain profitability in 2019, even after accounting for 220 million dollars they have refunded to customers in 2020.”

The Chicago-based American Property Casualty Insurance Association, an industry trade group, said PIRG of Illinois was “incorrect in its analysis of what happened in the Illinois auto insurance market as the COVID-19 pandemic swept across the country.”

“The data shows that insurers took appropriate steps immediately after the shutdown due to the COVID-19 pandemic and provided more than $14 billion in premium reductions as miles driven decreased. However, this decline was short-lived and mileage quickly recovered to pre-pandemic levels,” APCI told WGLT in a statement.

State Farm says it returned about $2 billion in premiums to auto customers and also reduced premiums by an average of 11 percent nationally (another $2.2 billion in six months).

“They returned a decent amount compared to Allstate, their biggest competitor,” Scarr said. “So much better, maybe, but still not good enough in our opinion.”

The APCI group also said that “introducing new premium returns now would be unwise as driving conditions have changed dramatically since the start of the pandemic”.

“The data shows that there are more deaths and inflationary pressures have caused the costs of medical care and vehicle repairs to rise sharply. These events increase insurance costs,” the association said.

The fight over auto premium data may be a precursor to a broader battle over how insurance companies are regulated in Illinois. When it released the COVID premium data, the Illinois Department of Insurance said it would “pursue legislation with members of the General Assembly to increase transparency and accountability in its work to regulate insurance companies.”

“We continue to demand transparency for consumers and will not allow companies to withhold information to serve their own interests instead of doing what is best for Illinois insurance consumers,” said IDOI Director Dana Popish Severinghaus, who denied the request for interview with WGLT.

The Illinois Department of Insurance has less regulatory scope and authority than similar agencies in other states, Scarr said. In many other countries, regulators must approve rate hikes. In Illinois, all insurers have to do is notify the Department of Insurance, Scarr said.

One factor in this power dynamic is that Illinois is home to the corporate headquarters of two of the nation’s largest insurers: State Farm and Allstate.

“We all know the industry is very strong in Illinois,” Scarr said. “But no one has really tried for at least a decade to challenge that and actually put the issue on the table. So I think it’s worth seeing what response we get.”

Scarr said PIRG of Illinois will support IDOI’s efforts to clarify its legal authority to request and publish data obtained from insurers. Illinois PIRG would also like to see Illinois become a “pre-approval” state for rate hikes, giving regulators the opportunity to review rate hikes before they are implemented, Scarr said. The group also would like to see state law changed to specifically prohibit excessive or unfair rates, as other states have done, he said.

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