State Regulation

State Senators, Consumer Advocates: Illinois Department of Insurance Should Investigate Car Insurance Overcharges

Advocates Estimate Illinois Drivers Should Have Received Nearly $900 Million in Additional Pandemic-Relief Refunds

 |  Press Release

Sixteen state Senators and nine advocacy organizations sent a letter Thursday to the Illinois Department of Insurance, asking the department to investigate how much insurance companies overcharged Illinois drivers during the first year of the COVID-19 pandemic.

In 2020, auto insurers across the country earned massive profits as Americans drove fewer miles while “sheltering in place” and working from home, which meant fewer vehicle crashes and auto insurance claims. While most large insurers, in response to public pressure, provided some refund or credit to consumers, the Consumer Federation of America (CFA) estimates that insurance companies still owe Illinois car insurance customers $896 million in pandemic relief.

“It’s unconscionable for any company to make windfall profits by overcharging consumers during the pandemic, but it’s even worse for a provider of a product such as insurance, which drivers are legally required to purchase,” said Illinois PIRG Director Abe Scarr. “Illinois-based State Farm has issued additional refunds to customers in California. The state Department of Insurance should work to get additional refunds for Illinois consumers.”

The CFA analysis of insurers’ 2020 premium and claims results found that insurers obtained $42 billion in excess premiums while refunding only $13 billion — meaning they overcharged consumers $29 billion. In effect, insurance companies shortchanged their customers by an average of $125 per insured vehicle nationwide.

“Too many insurance companies tried to maintain business as usual throughout the pandemic, despite less driving and fewer claims in Illinois and across the U.S.,” said state Sen. Jacqueline Collins. “Business as usual often means higher auto insurance prices in Black communities like those I represent even when there have been fewer crash related injuries.”

The letter encourages the Illinois Department of Insurance to take three actions:

  • Issue a “data call” to auto insurers to provide statistics about rates and losses since the beginning of March 2020.
  • Analyze the submitted data to determine if and how much Illinois drivers have specifically been overcharged.
  • If the facts, as expected, mirror those in other states that have already issued data calls, urge insurers to give additional premium refunds to policyholders.

“During the COVID-19 pandemic, Illinois drivers have paid massively overcharged premiums, about $896 million more than usual,” said Michael DeLong, a research and advocacy associate with CFA. “This greed is appalling, especially since many consumers are currently struggling to make ends meet. The Department should hold a data call and demand that insurers refund this premium to consumers.”

The California, New Mexico, and Washington Departments of Insurance have issued similar data calls to more fully assess the impact of mileage reductions on the exposure to risk of loss during the pandemic. California further directed the insurers Allstate, Mercury, and CSAA to refund excess premiums to California drivers or face legal action, a power the Illinois Department of Insurance does not have.