What Illinois Must Do To Avoid An Insurability Crisis

The following information was released by the Natural Resources Defense Council (NRDC):

Illinois lawmakers failed to pass a bill that would have given the state authority to regulate insurance rate increases by insurance companies, despite Governor JB Pritzker's call for increased state oversight of insurance rates. But the issue of skyrocketing insurance prices will not go awaybecause the risks are also increasing.

It's simple: If Illinois's homes and businesses are not built to withstand future storms, then those homes will not be insurable in the future.

The frequency and severity of disasters are increasing, as are the resulting damages. This means more insurance claims and higher insurance prices. While regulating insurance rates is important for consumer protection, it is not sufficient to address the long-term drivers of rate increases: rising disaster damages.

Without concerted efforts to reduce the potential for damage to homes and businesses, the state could find itself in an insurability crisiswhen the potential for widespread damage from natural hazards or disasters exceeds insurers' tolerance for those risks and the financial losses they represent. As a result, insurance becomes increasingly unaffordable and unavailable, and private insurers begin to retreat or abandon parts of the market. As we have seen in other states, many insurers will abandon a state's market entirely.

One early sign of an insurability crisis is spiking premiums. Between 2021 and 2024, homeowners' insurance prices rose 50 percent on average across Illinois, according to the Consumer Federation of America. State Farm announced in July that it will increase premiums by an average of 27 percent statewide. Underlying these premium increases are mounting losses and damages from natural hazards.

Consecutive years of major storms, tornadoes, and hailstorms; one or more catastrophic tornados (like the one that caused more than $1.6 billion in damage in St. Louis this past May); or a derecho windstorm (like the one that caused more than $11 billion of damage in the Midwest in 2020) could tip Illinois insurance markets into a crisis, similar to California, Florida, andLouisiana.

While Illinois does not experience hurricanes and wildfires, wind and hail are among the leading causes of disaster damages for insurance companies in Illinois and nationally (far surpassing wildfire losses). For Allstate, which is also headquartered in Illinois like State Farm, wind and hail comprised 71 percent of the $27.3 billion in disaster losses they paid out between 2012 and 2024, according to information filed with the Securities and Exchange Commission. For its part, State Farm cited hail damage as a driver of its rate increases.

Earlier this year, the governor, speaker, and senate president all called on members of the general assembly to pass legislation that would require insurers to get approval of the Illinois Department of Insurance for proposed rate increases. And when the general assembly reconvenes in 2026, it must also consider how the state will address the mounting risks from climate-influenced disasters and storms that are driving the price of insurance higher, each and every year.

NRDC urges the state to proceed with three actions.

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