Posted on July 13, 2022 at 1:33 pm CDT
A consumer advocacy group says recently released data shows that auto insurance has earned excessive profits during the pandemic, and proof that Illinois needs to regulate the industry more strictly.
The insurers fought back against the release of auto premium data at the time of COVID, demanded by a coalition of consumer groups and state lawmakers. People wanted to know how they got the money when people started driving less as a result of COVID. Insurers – who spoke through their trade groups – argued that the Illinois Department of Insurance “did not accept the data request, nor did it accept penalties through statutes or regulations.”
After all, the insurers complied, and the data was released on July 1st.
“Basically, it confirms what we already knew: when you looked at the premiums that these insurance companies took and compared them to their losses, and from 2020 to 2019, they made big profits,” said Abe Scarr, director of PIRG Illinois. (Public Interest Research Group). “In 2019 it was much higher than it would have been in terms of earnings to stay where they were, by the way, it was a very profitable year.”
The Illinois PIRG says preliminary analysis shows that “insurance companies may still owe $ 896 million to alleviate the pandemic for Illinois auto insurance customers.” Looking at Bloomington-based State Farm and three other major companies, the Illinois PIRG says it “charged customers $ 280 million more than they needed to maintain their 2019 profitability, even after accounting for $ 220 million they returned to customers in 2020.”
The Chicago-based American Property Casualty Insurance Association, an industry trade group, said the Illinois PIRG was “wrong in its analysis of what happened in the Illinois auto insurance market when the COVID-19 pandemic spread across the country.”
“The data show that insurers took appropriate action immediately after the outbreak of the COVID-19 pandemic and issued more than $ 14 billion in premium reductions as the mileage drove down. However, that decline was short, and the mileage was quickly recovered by the pandemic. to previous levels, ”the APCI said in a note to WGLT.
State Farm says it returned about $ 2 billion to car customers, which also dropped an average of 11 percent nationally (another $ 2.2 billion in six months).
“They gave a decent return compared to Allstate, the biggest competitor,” Scarr said. “So better, maybe, but it’s still not enough in our opinion.”
The APCI team also says: “Now it would not make sense to establish new premium payments, as driving conditions have changed dramatically since the pandemic began.”
“The data show that there are more deaths, and inflationary pressures have significantly increased the costs associated with medical care and vehicle repairs. These events are raising the cost of insurance, ”the association said.
The fight against auto premium data could be a precursor to a wider dispute over how Illinois insurance companies regulate it. When COVID released the premium data, the Illinois Department of Insurance said it would “continue to legislate 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 we will not allow companies to store information in response to their interests instead of doing what is best for Illinois insurance consumers,” said IDOI Director Dana Popish Severinghaus, who declined the WGLT interview request.
The Illinois Department of Insurance has less regulatory framework and power than similar agencies in other states, Scarr said. In many other states, regulators must sign a rate hike. In Illinois, all that insurance needs to do is report to the Department of Insurance, Scarr said.
One factor in this power dynamic is that Illinois has the corporate headquarters of two of the largest insurers in the country: State Farm and Allstate.
“We all know that the industry is very strong in Illinois,” Scarr said. “But no one has tried for at least a decade to question that and put the question on the table. So I think it’s worth seeing what kind of response we get. “
Scarr said the Illinois PIRG would support IDOI’s efforts to clarify the legal authority to request and publish data obtained by insurers. The Illinois PIRG would also like to see Illinois become a “prior approval” state for rate hikes, allowing regulators to review them before implementing rate hikes, Scarr said. The group would also like to change state law to explicitly ban excessive or unfair rates, as other states have done, he said.