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Illinois moves toward active rate regulation: A significant shift from decades of open competition

6/2/26

By: Donald Patrick Eckler

For more than fifty years, Illinois has stood apart as a “file-and-use” jurisdiction, relying on market competition rather than regulatory approval to govern insurance rates. That framework emerged after the repeal of prior approval laws in 1969 and the lapse of the State’s short-lived open competition statute in 1971. Since then, insurers have largely been free to set rates subject to general prohibitions against unfair discrimination, with the Department of Insurance playing a limited oversight role.

That paradigm is now poised to change. The Illinois General Assembly has passed SB0714 and HB4273, legislation that significantly expands the Department’s authority over insurance rate regulation. Governor J.B. Pritzker has indicated that he will sign the bills into law, marking one of the most consequential shifts in Illinois insurance regulation in decades.

At a high level, the legislation introduces direct regulatory review of rate filings in both the private passenger automobile and homeowners or fire and extended coverage markets. While Illinois stops short of adopting a full prior-approval system, the new structure represents a clear move toward more active oversight and regulatory intervention.

The legislation establishes explicit rate standards requiring that premiums not be excessive, inadequate, or unfairly discriminatory and that they reflect actuarially sound estimates of expected costs. More significantly, the Department of Insurance is now authorized to review filings after they are made and determine whether those standards are satisfied. If a filing is found deficient, the Department may require changes, order hearings, and ultimately mandate refunds to policyholders.

In practical terms, insurers will still be able to implement rate changes upon filing, but those rates will remain subject to retroactive review and potential adjustment. The Department will operate under defined timelines to review filings and issue determinations, and insurers will have corresponding rights to challenge those determinations through administrative hearings. Even so, the introduction of post-filing review authority fundamentally changes the risk landscape for insurers operating in Illinois.

The legislation also introduces new requirements governing the data used in ratemaking. Insurers must rely on credible Illinois-specific loss experience when available, with only limited ability to supplement that data with regional or national experience. This provision reflects a policy focus on preventing perceived cost-shifting from other jurisdictions into Illinois rate structures and may meaningfully affect pricing methodologies, particularly for carriers operating on a multistate basis.

In addition to the ratemaking provisions, the legislation strengthens consumer-facing requirements. Insurers must provide advance notice of significant premium increases, including extended notice periods where increases exceed defined thresholds. Carriers must also provide clearer disclosure of material changes to coverage or deductibles and comply with expanded nonrenewal notice obligations. These requirements will require updates to underwriting processes, systems, and policyholder communications.

SB0714 and HB4273 represent a meaningful shift in Illinois insurance regulation from a purely market-driven system to a hybrid model that incorporates active regulatory oversight. The legislation preserves elements of the existing file-and-use approach but overlays a structured review process that increases the Department’s influence over pricing outcomes.

For insurers, the impact will be immediate and operationally significant. Carriers must reassess rate filing strategies, enhance documentation and actuarial support, and prepare for the possibility of regulatory challenges and hearings. Compliance, legal, and actuarial teams will need to coordinate closely to navigate the new requirements and mitigate potential exposure.

Freeman Mathis & Gary is well positioned to assist clients in this evolving environment. The firm provides guidance on rate filing compliance, prepares insurers for Department inquiries and administrative proceedings, and advises on risk exposure under the new statutory standards. For more information, please contact Donald Patrick Eckler at patrick.eckler@fmglaw.com or your local FMG attorney.

Information conveyed herein should not be construed as legal advice or represent any specific or binding policy or procedure of any organization. Information provided is for educational purposes only. These materials are written in a general format and not intended to be advice applicable to any specific circumstance. Legal opinions may vary when based on subtle factual distinctions. All rights reserved. No part of this presentation may be reproduced, published or posted without the written permission of Freeman Mathis & Gary, LLP.