Car insurance premium inequities are driven by age, credit and ZIP code, study finds

It's well known that auto insurance companies charge more to people who have caused crashes or have had a DUI.

But the companies also charge more to customers over other factors they have less control over: age, credit and their ZIP code.

Those factors play a large role in customers' premiums and disproportionately affect older adults, low-income and working families, according to a new study commissioned by the Illinois secretary of state's office.

The study, released Thursday, found:

• Drivers with poor credit can pay more than 2.7 times higher premiums than someone with excellent credit.
• Older adults can face substantially higher rates despite a safe driving record. Drivers ages 80 to 84 pay up to 72% more for bodily injury coverage than drivers in their mid‑50s.
• Drivers in certain ZIP codes can pay more than 2.5 times higher rates than those in other parts of the state, even when all other factors are the same.

The study, conducted by New York-based auditing company O'Neil Risk Consulting & Algorithmic Auditing, backs up Secretary of State Alexi Giannoulias' push for a bill that he says would rein in car insurance costs that are unfairly discriminatory.

The bill, which passed the state House in March and is awaiting a Senate vote, would require the Illinois Department of Insurance to review auto and home insurance rate hikes over 10% and order refunds for customers it determines were overcharged. The state could contest proposed hikes if they are "excessive, inadequate, or unfairly discriminatory."

Every other state in the nation has similar laws to review rate hikes except for Illinois and Wyoming, according to Giannoulias' office.

"This study puts hard data behind what Illinois drivers have been experiencing for years — pricing practices that can penalize people for factors beyond their control," Giannoulias said in a statement.

A series of recent insurance rate hikes has spurred the debate over insurance premiums. Gov. JB Pritzker sparred earlier this year with Bloomington-based State Farm in calling for tighter regulations after homeowner insurance premiums rose an average of 27% last summer.

Car insurance premiums in Illinois rose 18% in 2024, according to Giannoulias.

But car insurance companies argue that the bill would destabilize the state's insurance market and actually result in higher premiums. After the bill passed the state House in March, a coalition of insurance companies issued a statement saying it represented the "most sweeping and harmful insurance regulatory overhauls in state history."

The insurance companies noted that the bill ignores that auto insurance rates in Illinois are 18% below the national average. Rates are also declining in Illinois due to fewer crashes and claims, contrary to rising rates nationally, according to the companies.

"I think [the insurance companies] are scaremongering," said Abe Scarr, director of the consumer advocate group Illinois PIRG. His group wants to outlaw the use of race and credit, among other factors, in setting insurance premiums.

The House-approved bill does not do that, he said. At most, the state could use the "unfairly discriminatory" language to reject rate hikes that rely on factors like credit ratings, Scarr said. But it's not clear if that will happen.

"I haven't seen this used in other states for this purpose, so we'll see how that's used here," Scarr said.

It's unclear when the bill could receive a Senate vote in Springfield.

Giannoulias' study focused on how “multiplicative factors” in premium rate-setting result in pricing disparities.

For instance, someone living in the 60426 ZIP code that covers south suburban Harvey would pay a bodily injury premium more than 2½ times higher than someone living in the downstate ZIP code 62379 in Warsaw, all other factors being the same.

When considering age, the study found that a base rate bodily injury premium of $100 would jump up to $118 for a 70-year-old and up to $172 for an 80-year-old.

Giannoulias' study also includes nearly 2,000 responses from residents. He's been collecting community feedback over the last year through his office's “Driving Change” campaign.

Among those giving feedback was Algia W., an older adult from Oak Lawn. She said her family's premiums have gone up yearly despite them never filing a claim. Her insurance company told her that was due to the rising number of claims in her area.

"We are close to retiring soon, and there is no way we could afford this coverage on a fixed income!" she said. "Why are WE paying higher premiums because of where we live?"

A 2019 Sun-Times investigation found that being a woman, living on the “wrong” side of two adjacent ZIP codes, renting rather than owning your home, or working in an unskilled job could result in a higher price quote for car insurance.