The Indiana Department of Insurance this week issued Bulletin 219 stating the Department’s position that the practice of “price optimization” in setting personal lines insurance rates is prohibited.
According to the Bulletin, “price optimization” involves “using data collection and analysis to predict which consumers will accept higher rates without changing insurers and/or varying premiums based upon factors that are unrelated to risk of loss so that each insured is charged the highest price that the market will bear.” This practice is prohibited, the Department said, because it views “a rating factor or rating methodology that adapts rates based on considerations other than risk to be at high risk of violating Indiana insurance laws, particularly IC 27-1-22-3, which requires that rates not be excessive, inadequate, or unfairly discriminatory.”
The Department advised that all companies using price optimization to set rates for policies sold in Indiana should submit a new rate filing within 90 days. Companies that don’t and are later found to be using price optimization in setting rates could be subject to discipline.
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