Lieutenant Governor and Department of Insurance Director Mary Taylor has warned Ohio insurers against the use of price optimization that can result in unfair discrimination.
Taylor recently issued Bulletin 2015-01, dated Jan. 29, to Ohio insurance companies noting that the use of price optimization violates Ohio law.
Price optimization is an insurance company’s practice of varying premiums based upon factors such as whether a consumer has complained about a policy or the amount or percentage change of the consumer’s premium over prior years.
This is done in order to charge each insurance consumer the highest price the market will bear. It represents a departure from traditional cost-based rating and can result in two insured people with similar risk profiles being charged different premiums.
Ohio law, however, requires premiums to be based on the risk that the consumer brings to the company and prohibits unfair discrimination.
Taylor’s action was applauded by the Consumer Federation of America and Center for Economic Justice saying that most Americans are required to buy auto and homeowners insurance and it is important that insurance commissioners protect consumers from unfair practices. The groups also urged other states to follow the lead of states like Ohio.
All insurance companies that use price optimization techniques in Ohio must end this practice and resubmit rates compliant with the bulletin no later than June 30, 2015.
Source: Ohio Department of Insurance
*This article originally appeared in our sister publication Insurance Journal.