Illinois insurers will now face stricter deadlines for settling claims and potential financial penalties for delays, following the passage of a new law aimed at accelerating payments to policyholders. The legislation, signed into law this month, mandates that insurers either approve or deny claims, or request necessary additional information, within 30 days of receiving notice of a claim.
Under the amended statute, Section 27-1-48 of the Illinois General Laws, insurers failing to meet this 30-day requirement will be subject to a penalty of $250 per day, payable directly to the insured party. The law, which took effect immediately upon passage, provides a financial incentive for prompt claim processing.
The Illinois Department of Business Regulation (DBR) will oversee enforcement of the new rules. Insured parties can file written complaints with the DBR, which will then investigate alleged violations. If the DBR director, or a designee, determines an insurer has violated the law, they are authorized to order the insurer to create payment to the insured within 14 days.
The legislation explicitly preserves existing rights for insured parties to pursue civil action against insurers for breach of contract or bad faith. It also clarifies that the new penalties do not limit any potential recovery or judgment for compensatory or punitive damages, or associated costs and expenses.
The Illinois Insurance Code (215 ILCS 5/) governs the state’s insurance industry, with laws maintained by the Legislative Reference Bureau. The new claim settlement timeline is an amendment to Chapter 215, specifically addressing domestic insurance companies. The Illinois Department of Insurance, with offices in Chicago and Springfield, oversees the implementation of these laws and regulations.
Statutory deposit requirements for insurance companies operating within Illinois are also outlined in state law. According to a chart maintained by the National Association of Insurance Commissioners, updated as recently as October 16, 2025, Illinois requires a deposit for most lines of insurance, though the specific amount varies. The requirements are separate from the new claim settlement law, but contribute to the overall regulatory framework for insurers in the state.
