State Farm is set to hike homeowners insurance rates by 27.2% in Illinois—adding roughly $746 to the average policyholder’s annual premium and igniting a growing political firestorm.

Nationwide, nearly 1 in 7 homes now lack insurance due to owners’ affordability concerns. But in Illinois, where regulators have little authority to block or review such increases, lawmakers are under mounting pressure to respond.

What’s at stake isn’t just higher monthly bills—it’s a broader battle over whether the state should step in to regulate an increasingly unstable home insurance market.

Why are rates rising? The insurer’s side of the story

State Farm says its 27.2% rate hike is a necessary correction after years of climate-fueled losses and rising construction costs. In its filing with the state, the company cited a clear pattern: Catastrophe losses in Illinois exceeded projections in 13 of the last 15 years, creating what it called a persistent shortfall in risk-based pricing.

And State Farm isn’t alone. Allstate raised rates 14.3% earlier this year, following back-to-back increases from both insurers in 2024—12.7% for Allstate, 12.3% for State Farm.

State Farm did not immediately respond to a request for comment from Realtor.com®. But according to a statement on the insurer’s website, the math just isn’t sustainable: For every $1 collected from Illinois homeowners in 2024, the company says it paid out $1.26 in claims and costs. In 2023, that number was even higher: $1.30 per $1 collected.

The biggest culprit? Hail. State Farm reported $638 million in hail damage claims in Illinois last year, second only to Texas, which topped $1 billion.

At the heart of the company’s defense is a simple claim: if premiums don’t reflect risk, the system breaks down.

“As a mutual company, State Farm is focused on serving its policyholders,” its website states. “Unlike companies with shareholders, our goal is not to maximize profits but to earn enough to maintain financial strength that allows us to keep the promises we make and to support future growth.”

‘Unfair and arbitrary’: The political backlash begins

But Illinois Gov. JB Pritzker says that State Farm’s justifications don’t add up.

He blasted the rate hikes as “unfair and arbitrary” and accused the company of using Illinois policyholders to subsidize disaster losses elsewhere. “Hardworking Illinoisans should not be paying more to protect beach houses in Florida,” he said.

He wasn’t alone. Illinois House Speaker Emanuel “Chris” Welch called the hike “wrong” and promised scrutiny if State Farm doesn’t reverse course. “We have to protect our consumers,” Welch told the Chicago Tribune. Other top Democrats echoed the call, signaling that regulatory reform may be on the table when the legislature reconvenes.

But not everyone is on board with government intervention. Republican State Rep. Jeff Keicher, a longtime State Farm agent, warned that aggressive oversight could backfire. He pointed to California, where a growing number of insurers have stopped writing new policies, citing regulatory constraints.

“The worst thing we can do is force insurers to underprice and go out of business,” Keicher told the Tribune, “and leave homeowners without a way to get their home fixed if the worst happens.”

The political divide reflects a deeper question: How do you protect consumers from skyrocketing costs without driving insurers out of the market? In Illinois, that debate is now front and center.

Why Illinois is uniquely powerless

Unlike most states, Illinois has no meaningful rate review process for homeowners insurance, meaning insurers can raise premiums without approval from regulators. Once a company files new rates with the Department of Insurance, that’s typically the end of the story.

That lack of consumer protection has drawn increased scrutiny in the wake of State Farm’s hike. Supporters of reform point to a model that’s already working: Last year, Pritzker signed legislation requiring rate review for large group health insurance, allowing the state to block excessive increases.

Now, lawmakers like Rep. Bob Morgan want to apply that same framework to homeowners policies, creating a process where companies must justify large hikes with data, and regulators can reject increases deemed unfair or excessive.

The proposals on the table

In the wake of State Farm’s rate hike, lawmakers are fast-tracking a slate of proposals aimed at giving Illinois more oversight and homeowners more protection.

The rate review system is a top priority for the Pritzker administration. This bill would require insurance companies to submit proposed increases to the Illinois Department of Insurance for review. If a hike is deemed “excessive, inadequate, or unfairly discriminatory,” the department could reject it before it takes effect.

A companion bill would require insurers to publicly explain premium changes each year. Companies would need to disclose five years of historical rate data and offer a plain-language summary of the key drivers behind any increases.

To address risk at its source, legislators are also exploring policies that reward communities that work together to reduce their vulnerability to natural disasters like floods. One idea is to expand participation in FEMA’s Community Rating System, which offers lower flood insurance premiums to municipalities that meet certain flood resilience standards—an approach already in place in Calumet City. Other proposals include state-backed mitigation grants or new building standards that could help reduce long-term insurance costs.

The pushback: Insurers say new laws could backfire

Insurers and trade groups argue that the proposed laws could backfire by reducing competition and pushing premiums even higher, as they say has happened in highly regulated markets like California.

Instead of regulation, the industry is advocating for measures that would improve risk mitigation. These include encouraging homeowners to shop around for policies, offering incentives for protective upgrades, and adopting stronger home construction standards to make properties more resilient to future storms.

The underlying message from insurers: Rising premiums are being driven by real, structural challenges, and too much intervention could make the problem worse.

What happens next

State Farm policyholders will start seeing higher premiums on their bills as soon as Aug. 15. In the meantime, all eyes are on Springfield, where lawmakers face growing pressure to deliver real protections for homeowners grappling with soaring insurance costs.

Rep. Thaddeus Jones has indicated plans to hold public hearings, giving residents a platform to share how rising premiums are affecting their lives and pushing for greater accountability from insurers. Meanwhile, Sen. Michael Hastings has expressed hope for a “collaborative effort” between the insurance industry and legislators to find solutions that balance affordability with market stability.

With bipartisan concern mounting and policy ideas gaining momentum, the upcoming session is likely to be one of the most consequential in years for Illinois homeowners.

Related Articles