Dive Brief:
- State Farm is increasing homeowners insurance rates in Illinois by 27%, with new rates reflected in existing policies starting Aug. 15. Illinois state leaders called it the “largest single rate hike in recent history” and said it would add an average of $750 annually to homeowners’ insurance bills.
- Illinois Gov. JB Pritzker called the rate hike “unfair and arbitrary” and urged state lawmakers to “enact a legislative solution” to prevent insurers from making “severe and unnecessary” rate hikes in the state.
- Nationwide, increases in home insurance premiums, driven in part by a rise in climate-related disasters, are adding to the rising cost of homeownership.
Dive Insight:
Home insurance premiums in the U.S. soared 57% from 2019 to 2024, according to Harvard University’s Joint Center for Housing Studies, citing data from the Federal Home Loan Mortgage Corp.
The sharpest increases were in areas more vulnerable to climate disasters, such as Florida, according to JCHS. Some insurance companies have ceased selling homeowners insurance in more vulnerable areas.
State Farm said for every $1 it earned in Illinois in 2024, it paid out $1.26, a loss it credited to an increase in severe weather and increased material and labor costs for repairs or reconstruction. The company said hail damage alone was responsible for $638 million in damages it paid in the state last year.
The insurance company said its rate hike is in line with what other insurance companies have done. “Over the last three years, many insurers have raised Homeowners rates, citing deteriorating loss trends in Illinois,” the company stated. In February, Allstate raised homeowners insurance rates in Illinois 14.3%, but it insures fewer homes in the state compared with State Farm.
State Farm also recently increased homeowners insurance rates in California, where insurers must receive approval from an elected insurance commissioner to increase premiums. State Farm asked for a 30% rate increase but was granted an emergency 17% increase, which went into effect June 1.
While Illinois has seen more intense rain events in recent years, state leaders argued the state’s weather is not as extreme as in other states and questioned whether State Farm’s increase was to pay off losses it felt in other states.
“Illinois premiums are priced for the risk in this state — not for losses in other states, including wildfires, earthquakes, or hurricanes,” State Farm stated.
