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NAIC Probes Higher Priced Policies for Customers Who Don't Shop

The National Association of Insurance Commissioners is looking into allegations by the Consumer Federation of America that the use of "price optimization technology" violates state laws that prohibit unfair pricing...
January 23, 2015

The National Association of Insurance Commissioners (NAIC) is looking into allegations by the Consumer Federation of America (CFA) that the use of "price optimization technology" violates state laws that prohibit unfair pricing. The CFA believes Allstate violated laws in 15 states by setting its 2014 rates higher for consumers who do not shop for lower-cost policies.

Those allegedly penalized include people who don't use the Internet to shop and who don't have ready access to insurance agents who can help them find lower rates.

On October 31, the Maryland Insurance Administration (MIA) issued a bulletin alerting property and casualty insurers that the MIA believes price optimization to be an unfairly discriminatory practice in violation of state law. Price optimization refers to the practice of varying rates based on factors other than the risk of loss — such as the likelihood that policyholders will renew their policies. Maryland law prohibits discriminating among insured of the same class based on something other than actuarial risk. The bulletin states that this practice is most common in auto and home insurance, but some evidence of it has been found in commercial lines. Bulletin 14-23 can be found here.

Allstate said the allegations "continue to be wrong and misinformed. Our prices are legal and actuarially sound."

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