Auto Insurance Industry’s Secret
Sophisticated Technology May Increase Your Premiums
In addition to your driving record, we recently shared that 
insurance companies use your credit score to determine your auto insurance premiums and that there is not much you can do about it. Insurance companies are more concerned about how well you pay your bills or how likely you are to file a claim.
Now, consumer advocate groups want regulators to stop insurance companies from using sophisticated software to help car insurers illegally bump up bills on customers it tags as less likely to switch companies. This often skirts consumer protection laws and leads to higher premiums.
The software mines consumer data to help car insurers figure out who is more likely to tolerate higher premiums and who is less likely to shop around. The industry calls this price optimization.
As reported in the Palm Beach Post:
- The Consumer Federation of America, a consumer advocacy organization, wants state regulators to stop insurers from using such illegal techniques because they can result in drivers with the same risk profile being charged different premiums. “Every state has laws that say that prices must be based on risk and may not unfairly discriminate. Insurance companies appear to be using these techniques without disclosing that fact to state regulators,” a statement from the consumer group said.
- Florida’s Office of Insurance Regulation spokesman Harvey Bennett stated that he believes, “price optimization should not be a factor in determining insurance premiums nor have we allowed it.”
- “This so-called ‘price optimization’ is the latest effort by insurers to mine personal consumer information and to evade state consumer protection laws prohibiting unfair discrimination in insurance pricing,” said Birny Birnbaum, executive director of the Center for Economic Justice. “Insurers have generally failed to disclose their use of price optimization to insurance regulators.”
Consumers beware. When it comes to buying auto insurance, we recommend that you shop around.
