State Farm Hikes Illinois Home Insurance by 27 Percent

State Farm will raise homeowners insurance premiums by 27.2 percent in its home state, one of the largest rate hikes in Illinois history, the Chicago Tribune reported. Critics say it’s a sign that climate risk is hitting the Midwest’s pocketbooks.

The increase, which affects nearly 1.5 million State Farm customers, takes effect Aug. 15 alongside a newly implemented 1 percent minimum deductible on wind and hail claims. New policyholders are already subject to the higher rates.

The Bloomington-based insurer said it posted “unsustainable” losses in 13 of the past 15 years on Illinois home policies, pointing to escalating extreme weather events, especially hail and wind, as well as inflation’s impact on repair costs. It said last year alone it paid $1.26 in claims for every $1 collected in premiums, including $638 million for hail damage in Illinois, second only to Texas.

“These losses are driven in part by severe weather damaging communities across the state,” State Farm said. “No company can absorb such losses forever and still be there for customers when disaster strikes.”

Gov. J.B. Pritzker called the hike “unfair and arbitrary” and, pointing out differences between State Farm’s catastrophe loss numbers and the Illinois Department of Insurance’s analysis, suggested the insurer was offloading losses from other states onto Illinois residents.

State Farm denied cross-subsidizing and said “Illinois rates are based on Illinois risk.” But insurance analysts note multi-state climate events can still impact reinsurance costs systemwide; that is, the cost of insurance for the insurance companies themselves.

From 2019 to 2024, Illinois homeowners premiums rose nearly 60 percent, outpacing the national average. Meanwhile, calls for state regulation are growing louder. Unlike most states, Illinois does not require pre-approval for rate increases even for major insurers like State Farm and Allstate, both headquartered in the state.

Legislation pending in Springfield would change that, granting the Illinois Department of Insurance the power to reject or modify large hikes. Advocates say it’s long overdue.

“At a minimum, Illinois should empower the state Department of Insurance to reject or modify excessive rate hikes, a basic consumer protection that residents in almost every other state enjoy.” said Abe Scarr of Illinois PIRG, a consumer advocacy nonprofit.

The average State Farm policyholder in Illinois pays about $1,700 per year; the new rate would tack on $475 to that. That’s in addition to rising repair costs and stricter deductibles, leaving many homeowners bracing for the real price of climate risk.

— Judah Duke