State senator aims to put price optimization to rest
Oklahoma drivers have been seeing their auto insurance premiums steadily grow over the past few years, and one of the state’s legislators want to put an end to a practice that has contributed to this problem. In Oklahoma, many insurers use price optimization as a way to price coverage, which leverages a consumer’s credit score as a factor in determining premiums. Senator Rob Standridge intends to introduce new legislation that will prevent insurers from using price optimization.
Senator to introduce new legislation that will prevent auto insurance companies from using price optimization
According to Senator Standridge, price optimization “doesn’t make any sense.” The use of this practice has been driving up auto insurance premiums, placing many consumers under a significant financial pressure. This practice involves insurers using non-risk-related factors to price auto insurance coverage. In many states, the use of this practice is being considered discriminatory. Regulators in several states, including California, Florida, Pennsylvania, and Washington, have taken steps to curb the use of price optimization.
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Many insurers are using the price optimization practice
According to a 2013 survey from Earnix, a provider of price optimization software, approximately 45% of large insurance companies use price optimization. An estimated 26% of all insurance companies in North America make use of this practice as well. In the United States, the National Association of Insurance Commissioners began taking steps to provide more information concerning price optimization. In October, the organization began updating its white paper, which provides background research about the practice, as well as other information.
Auto insurance premiums may be affected as insurers stop using price optimization
Doing away with price optimization may have a significant impact on auto insurance premiums. As insurers are forced to move away from using this practice, premiums may drop for some consumers. The overall price of auto insurance is, however, based on many factors and price optimization is only one part of the pricing process. In Oklahoma, new legislation could prove to be a benefit for drivers, but the legislation will need support from lawmakers before it can have any affect.