Technology now allows consumers to compare car insurance prices practically with the tip of their fingertips, so regulators are making carriers toe the line in pricing their products, according to a recent report.
So far, the report said, 16 states, including Colorado, Minnesota, and Virginia, have banned the practice of “price optimization,” in which clients are also made to pay for the broker’s commission as their premiums skyrocket.
Further, price optimization is a practice that pegs insurance premiums at levels at which consumers will best respond to them to meet company objectives such as optimizing profits.
Connecticut Insurance Commissioner Katharine Wade further explained in the report that her department has already warned carriers in the state against using the pricing method because it is based more on the clients’ buying habits than on sound actuarial and risk-based principles.
Wade added that the Insurance Department regards the practice as discriminatory and therefore a violation of state insurance law.
“It can result in two policy holders who have the same loss history and risk profile receiving two different premium increases,” she added.
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