Experts weigh in on State Farm insurance policy change affecting hundreds of thousands of households: 'Death by a thousand cuts'

Extreme weather has been increasing globally as the world overheats, but certain areas are more severely affected than others. For example, coastal states like California and Florida are more prone to destructive storms.

What's happening?

Illinois is not one of the most vulnerable parts of the United States — but that has not stopped insurer State Farm from raising its rates 27% this year, prompting outrage from local politicians, Politico reported.

State Farm provides roughly a third of homeowners' insurance policies in Illinois, making it the state's largest property insurer. In August, it announced rate hikes averaging 27% for its policyholders. 

While State Farm blamed the increases on inflation and natural disasters, Governor JB Pritzker had a different theory.

He called the price hike "unfair," according to Politico, said that the insurer's projected losses were "entirely inconsistent" with the state's own calculations, and accused State Farm of using Illinois ratepayers to subsidize the company's losses in other states. In response, he called for state lawmakers to enact "commonsense consumer protection" measures.

Why is this insurance trend important?

This is far from the only recent rate hike for homeowners' insurance. Insurers across America have been sharply raising their prices or pulling out of the market entirely. While inflation and rising costs are factors, this example illustrates what many have suspected: corporate greed is more to blame than practical reality.

And every day, Americans are paying the price. In the best-case scenario, homeowners are stuck paying significantly more for their insurance. However, many cannot afford the rate increases and may end up uninsured, exposing them to a significant amount of risk. If their homes are damaged or destroyed, they may not have the financial means to recover.

This scenario gets more likely all the time. While Illinois is not the hardest hit by extreme weather, it is seeing more intense storms than before. 

"These are perils that any given event is not going to rise to the level of an L.A. wildfire or a Category 5 hurricane hitting Florida. What you instead get with severe convective storms is death by a thousand cuts," said Victor Gensini, an atmospheric sciences professor at Northern Illinois University, per Politico.

That makes insurance more necessary than ever.

What's being done about rising insurance costs?

Illinois state representatives considered a bill in October that would give the state the power to review rate hikes over 10%. However, it didn't pass, so the next opportunity to pass similar legislation will be in January, Capitol News Illinois reported.

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