STATE INSURANCE COMMISSIONERS TAKE ON PRICE OPTIMIZATION
To date, four states—California, Florida, Maryland and
Ohio—have issued formal bulletins and memoranda, prohibiting
the practice of "price optimization" by property and
casualty insurers, with a special focus on insurers in the auto
industry. Although the National Association of Insurance
Commissioners (NAIC) has yet to finalize its recommendations on the
practice, insurers can expect to face increasing scrutiny from
state regulators.
Background
Although there is no single definition for price optimization,
it refers generally to the use of data analytics to measure and
respond to consumer sensitivity to price increases. In a general
sense, the practice is hardly new. In the competitive business of
insurance, insurers have long needed to address the need for higher
premiums without losing policyholders in the process. For example,
insurers frequently consider how many competitors are in a given
market and
