State Farm raising Illinois auto rates - Crain's Chicago Business

State Farm is grabbing back some of that hefty auto insurance rate cut it gave Illinois drivers last summer.

The Bloomington-based insurance giant, which insures roughly one in three vehicles in its home state, is raising rates by 4.2 percent on average beginning March 29, according to a filing with the Illinois Department of Insurance.

State Farm reduced premiums in Illinois by nearly 14 percent on average last summer in response to a dramatic decline in auto accidents. With far fewer drivers on the road as many people worked from home, auto insurers paid out substantially less than anticipated in claims.

State Farm, the nation’s largest auto insurer, led the industry response, reducing rates nationwide by 11 percent on average. Illinois customers got one of the most generous rate cuts of all the states.

But more drivers are hitting the roads now than in the early months of the pandemic—albeit not yet back to pre-COVID levels—and State Farm is modestly raising rates accordingly in many states. They include surrounding states like Michigan, Wisconsin and Indiana.

“Our data indicates more people are driving, and it's resulting in an increase in auto claims from the levels in the spring of 2020,” a State Farm spokeswoman said in an email. “With the recent adjustments, rates remain below pre-COVID-19 levels, although miles driven and claim volume have increased. Our approach remains the same—to make incremental adjustments based on driving behaviors to ensure the rates we have in place reflect anticipated driving and claim volume, and to minimize the impact to customers as much as possible.”

The summer rate cut did drive some growth in Illinois for State Farm, which has been far and away the state’s leading insurer for decades but has struggled to grow in recent years. The number of Illinois vehicles insured by State Farm increased 1.7 percent between June and February, to 2.87 million, according to Insurance Department filings.

Other major competitors have responded with rate cuts of their own. Northbrook-based Allstate just reduced rates on average in Illinois by 5 percent. Suburban Cleveland-based Progessive and Chevy Chase, Md.-based Geico also have cut prices in Illinois.

With every major insurer intent on taking advantage of the COVID disruption to grow, what is now a price skirmish has the potential to become a price war. So far, though, both State Farm and Progressive have been quick to moderate previous rate cuts as driving activity increases.

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