Engage in price optimization and face fines and other penalties. That’s the message from the Michigan Department of Insurance and Financial Services to insurers statewide.
“When we see a failure to abide by the Insurance Code, we refer those cases for investigation and possible enforcement action,” Laura Hall, director of the Office of Communications at the Michigan Department of Insurance and Financial Services, told Insurify.
The bulletin sent by department Director Anita G. Fox reminds insurers that price optimization is prohibited under Michigan state law.
Price optimization is the practice of using data to estimate the highest price a policyholder will pay before they look for coverage elsewhere.
Michigan protects the affordability of property and casualty rates through the Michigan Insurance Code which states: “rates for property and casualty insurance shall not be excessive, inadequate, or unfairly discriminatory.”
The state judges rates to be discriminatory if the price difference, for identical coverage, cannot be justified by expenses, losses or both.
Keeping high rates in check
The notice from Director Fox informs Michigan insurers that “The Director closely reviews all rate filings to ensure that price optimization is not occurring. Companies making rate filings must also attest that they do not utilize price optimization. DIFS will take appropriate administrative action against any companies employing price optimization in any form.”
That’s good news for Michigan residents as they already pay some of the highest car insurance rates in the nation, averaging $349 per month for full coverage and $185 for liability protection according to Insurify data.
The national average for full coverage insurance is $213 and $104 for liability insurance.
Home insurance rates in the state are near national averages, but Michigan’s no-fault car insurance system elevates its car insurance premiums.
What’s next? Working with insurers to benefit consumers
“The Department issued the bulletin as part of its ongoing efforts to remind consumers and industry about important insurance topics,” Laura Hall, director of the Office of Communications at the Michigan Department of Insurance and Financial Services, told Insurify. “Past examples of those efforts include notices about cancer health coverage, reproductive rights, LGBTQ+ protections, and more.”
If state regulators catch an insurer practicing price optimization, it could face penalties, Hall added.
However, she added, the goal is always to work with insurers, even those who aren’t following state guidelines. “Through these cases, we work to bring companies into compliance, ensure the consumer is made whole, and levy fines and other penalties to deter future bad conduct.”
This article originally appeared on Insurify and was syndicated by MediaFeed.
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