Department of Insurance bans the use of controversial price optimization practice
The Missouri Department of Insurance has officially banned the use of price optimization among insurance providers. Insurance Commissioner John Huff has issued a warning to insurers using this pricing method that they will be faced with severe penalties if they continue to do so. This decision affects the insurance industry in the state, applying to a variety of companies, especially property and casualty insurance companies.
Price optimization continues to cause problems for the insurance industry
Price optimization has become quite controversial in recent months. In several states, those regulating the insurance industry have decried the pricing method. Regulators suggest that price optimization is unduly discriminatory, placing some consumers under great financial strain due to rising premiums. Notably, price optimization tends to affect those that are likely to show loyalty to their insurance provider, as these consumers tend to pay more for their coverage than other customers.
_________________________Random Success Quotes to Remember ~ "Take up one idea. Make that one idea your life -- think of it, dream of it, live on that idea. Let the brain, muscles, nerves, every part of your body be full of that idea, and just leave every other idea alone. This is the way to success." -- Swami Vivekananda
Practice is considered discriminatory against consumers
The practice of price optimization involves pricing coverage based on consumer buying habits rather than actuarial risks. Insurers using this practice make use of non-risk factors to determine increases in premiums and the overall cost of insurance coverage. Price optimization is relatively popular in the insurance industry, though many insurers avoid addressing the issue directly. Missouri has become the 17th state to ban the practice of price optimization, taking a direct approach to the problem that insurers tend to shy away from.
Insurers could face significant consequences for practicing price optimization
Price optimization is often seen as a way for the insurance industry to mitigate costs and generate additional revenue. This has become a problem for consumers, as it has lead to higher premiums, which has caused some to question the value of their insurance policies. The practice generally involves insurers raising premiums as much as they can before a customer is expected to consider shopping for coverage from other providers. Several states consider this to be exploitation of consumers and insurers practicing price optimization in these states are likely to face fines and, in some severe cases, legal action.