As of press time, price optimization in the automobile-insurance industry—the practice of raising premiums for customers who are less likely to shop for a better price—was banned by 13 states. That could expand rapidly.
In an October 2015 white paper, National Association of Insurance Commissioners (NAIC), which coordinates regulations among state-level insurance regulators, recommended that states prohibit insurers from using price optimization.
After NAIC’s completed study is adopted by its member regulators—possibly by spring 2016—each state would decide whether to ban the practice. NAIC says that because states have laws that say premiums must be based on the true actuarial cost of insurance, lawmakers don’t have to take formal action to outlaw price optimization.
Until such a ban is in place, J. Robert Hunter, who is the director of insurance for Consumer Federation of America, says consumers should “shop, shop, shop.”
“I have worked with several people who suffered unexplained price increases,” he says. “Shopping has resulted in significant savings,” even when the consumer ultimately stayed with his/her original insurer.