State Farm said an annual rate reduction of $62 million was made possible by falling claims and improved efficiency of operations. Premium cuts will take effect when customers renew coverage.
About one-third of Illinois motorists are insured by State Farm.
The company is bucking a trend of generally rising auto insurance premiums.
"When we see some of these positive trends, we can pass those on to our existing customers and new customers," State Farm spokesman Joe Johnson told the Chicago Tribune.
State Farm's auto insurance premiums have fallen more than 17 percent in Illinois over the past decade. The company has reduced rates in 17 states since January.
Only North Dakota drivers have seen an increase in State Farm's insurance rates.