Illinois car insurance market doesn’t need more regulation

Ramping up regulatory requirements for Illinois insurers seems to be a solution in need of a problem. There is nothing wrong with the automobile insurance market in Illinois that more regulation needs to “fix.”

Our market is healthy, insurance consumers have countless choices and the price for auto insurance in our state is below the national average. More regulation may, in fact, tap the brakes on what is currently an efficient, consumer-focused insurance marketplace.

Among those clamoring for increased insurance regulation are people critical of using a range of factors to measure risk and price auto insurance. However, using these factors is the fairest way to price insurance.

Some groups will likely be equally critical when they learn what happens to pricing when differentiators are eliminated. All drivers will pay more. Why? Because ambiguity has a cost. Ignoring data points that have proven to correlate to future claims makes it impossible to give every driver the rate they deserve. Good drivers will pay more than they should when uncertainty forces risk to be spread more broadly.

Insurance is a data-driven business. Any data point that helps bring accuracy to pricing means policyholders pay an amount that best matches their personal risk profile. Although insurance is pooled risk, everyone in the pool should not pay an equal share if they represent more than their fair share of risk.

Safe drivers deserve better. That is why insurers use different rating factors to differentiate good drivers from those who may appear to be an accident waiting to happen. This is all about putting the consumer first. Fairness above all else.

Some of the rating factors an insurer may use to properly price insurance protection include one’s credit score or other demographic details that have proven accurate in predicting the likelihood and cost of claims. Not every insurance company uses the same factors. This is good news, because consumers are truly in the driver’s seat and can shop around for options. Illinois is a buyer’s market for insurance, with more than 200 auto insurance companies competing for business. Why tamper with something that is working so well? Lynne McChristian, senior instructor and director, Office of Risk Management & Insurance Research, University of Illinois Urbana-Champaign

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