Here’s an appalling fact: The cost of your car insurance in Illinois isn’t based on your driving record — it’s based on things such as the neighborhood where you live and your credit score.
This is shameful. Especially when you consider that a motorist with driving under the influence on their record but solid credit pays far less than a driver with a spotless driving record and a low credit rating. Yes, you read that correctly.
As secretary of state, my top priority is keeping our roads safe. And if the purpose of auto insurance is to protect Illinois’ 9.4 million motorists, it only makes sense that their driving records should be the primary factor for setting their rates.
But as it stands now, the amount you pay for insurance is largely based on socioeconomic factors and — now, especially with artificial intelligence — your social media algorithms.
Insurance companies rely on credit scores, ZIP codes, age and data from those sneaky third-party apps on your phone to determine how much you pay them. Together, these factors — except, of course, the driving record — create a confusing and unfair ratemaking process that lacks not only transparency but common sense.
When nondriving factors are included in ratemaking, not everyone suffers equally. Senior citizens living on fixed incomes, people of color, and those already struggling to pay their bills are disproportionately affected and hit with higher insurance premiums.
But don’t just take my word for it. Consumer Reports and ProPublica analyzed insurance rates and found that in Illinois, all but one of the 34 insurance companies studied charged rates that were at least 10% higher for safe drivers living in predominately minority ZIP codes compared with those in non-minority ZIP codes.
The nonprofit Consumer Federation of America found Illinoisans with perfect driving records and excellent credit (a score of 800 to 850) pay an average annual premium of $424 for state-mandated auto insurance. But consumers with the same driving record but worse credit (a score of 580 to 669) pay an average premium of $607 — at least 40% more. Meanwhile, good drivers with poor credit (a score of 300 to 579) pay an average premium of $915 — a 116% increase compared with those drivers with excellent credit.
It also determined an Illinois driver with a DUI conviction but with an excellent credit history paid $862 less a year for car insurance than someone with a good driving record but a poor credit history!
To shine a light on the ratemaking process, the secretary of state’s office is championing legislation in Springfield that would enlist outside experts to determine how non-driving-related factors affect certain demographics of drivers.
Keep in mind: Auto insurance premiums in Illinois jumped a whopping 18% in Illinois last year and are projected to climb even higher this year, according to Insurify, which compares quotes from insurance providers.
In Illinois, if you can’t afford your insurance, you can’t drive. And that makes it harder to run essential errands, transport your kids, get to work, receive a paycheck, and ultimately earn a living and provide for your family. The blatant biases against individuals and families living in low-income neighborhoods amplifies the economic disparities that have already formed the tragic reality of the “two Americas,” further exacerbating the injustice and inequality that persist.
And if you choose to drive without required auto insurance, then you face civil fines, the loss of driving privileges and reinstatement fees, a sometimes endless and even more costly cycle. Most worrisome is that these drivers make our roads less safe — for everyone.
There’s still much that we don’t know about these algorithms and nondriving ratemaking factors, which is why we need House Bill 1234. We need public input, and we need the insurance industry to work with us. If there’s a good explanation for why driving records don’t matter, but your ZIP code does, we’d like to hear “how” and “why.” We’re all ears.
As it stands, Illinois and Wyoming remain the only states in the entire country that allow insurance companies to increase rates without any type of state regulation or oversight prior to an increased rate.
The truth is simple — the current system has created a patently unfair, unaffordable and unjust ratemaking system for statutorily mandated automobile insurance. Your ZIP code, credit score or social media presence should not determine how much you pay for car insurance. This not only unfairly punishes the people who can least afford it, but it also creates danger on our roads.
Safe drivers shouldn’t be paying the price for a system that is rigged against them. HB1234 would bring transparency and accountability to the ratemaking process and put drivers first.
Alexi Giannoulias is the secretary of state for Illinois.
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