The Illinois Legislature is considering legislation that would grant state regulators unprecedented authority to review and reject home insurance rate increases, a move sparked by State Farm's controversial 27.2% rate hike that affected 1.49 million policyholders last year.
House Bill 3799 would authorize the Illinois Department of Insurance to review rate filings and reject those deemed excessive, inadequate or unfairly discriminatory. The measure would also permit the regulator to require insurers to issue retroactive refunds to policyholders under certain conditions.
The legislative push follows State Farm's implementation of the July 2025 increase, which saw some individual policyholders face premium jumps as high as 39.9%, data shows. Governor JB Pritzker challenged the rate hike and called for regulatory reform.
Under the proposed legislation, insurers could not increase rates by more than 10% without providing written notice at least 60 days before the renewal date, doubling the current 30-day requirement.
The bill mandates 60 days' notice before canceling a policy that has been in force for more than 60 days. For policies in force fewer than 60 days, insurers would need to provide 30 days' notice before cancellation.
Illinois has faced challenges with homeowners insurance profitability, ranking as the fifth-worst state for median direct combined ratio for homeowners and farmowners coverage from 2012 to 2022, AM Best data indicates.
The Illinois Insurance Association said the legislation would destabilize the market, reduce competition and drive up premiums. Kevin Martin, the association's executive director, wrote in an op-ed that the bill would move Illinois toward a de facto prior-approval rate system.
"The legislation moves Illinois toward a de facto prior-approval rate system, similar to the regulatory structure in California that has consistently produced higher premiums, fewer insurers and reduced competition," Martin said.
Martin said the measure would create a hybrid rate review process combining elements of file-and-use and prior-approval systems, an untested approach that could drive carriers out of the state.
The bill does not establish standards for determining what constitutes a "complete filing," which could allow the regulator to delay rate requests indefinitely and result in rate inadequacy, the executive noted. He said retroactive refunds would be unlimited and unpredictable, creating confusion and volatility.
The association proposed alternative measures, including reinstating standards to ensure rates are not excessive, inadequate or discriminatory, filings reveal. The industry group recommended prohibiting cost-shifting between states and requiring notices for rate increases above 10% for noncontract factors.
The Illinois House of Representatives rejected similar legislation in 2025 following opposition from the insurance industry.
