Car Insurers Customers Unfairly Penalized For Shopping Habits
By Charles Elmore, The Palm Beach Post, Fla. | |
McClatchy-Tribune Information Services |
Whatever the outcome of this flap, it's a 21st century reminder for consumers to heed some 20th century advice from the Miracles and the Captain and Tennille: Better shop around.
Consumer organizations at a recent meeting of regulators in
It's called price optimization.
It is not illegal, insists
The result has been intense competition that helps consumers by keeping prices down in the long run, he said. Just turn on the TV to see boundless advertising by car insurers that highlights this fierce battle. Companies who set prices a little higher might hope to make more money, but risk losing customers to competitors who set them a little lower, he said.
"There's nothing nefarious about it," Hartwig said.
Asked about its position,
Then again, consumer groups say insurers aren't necessarily disclosing this to regulators, yet somebody's using it -- an Earnix survey found nearly half of responding insurers with more than
An Earnix executive told
"Nothing has really changed," said
Consumer groups paint a darker picture. Price optimization "is a new strategy to overcharge Americans who have to buy auto and home insurance policies," said
The software tends to penalize people not for their driving but factors such as where they live, available market options and perceived financial literacy, Hunter says. If a segment of customers is deemed less likely to switch despite higher premiums, he says, prices are raised to an "optimum" level for that group.
"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
Earnix's Golden responded, "The same actuarial, consumer protection and regulatory standards apply as they always have. Insurers using price optimization software or not must establish rates that comply with the standards and laws."
Few dispute that insurers routinely take into account more than your driving record when they consider you as a customer. For evidence, just look at auto insurance scores, available for free if you sign up on a site like creditkarma.com. These scores are based on things like how well you pay your bills, not how well you drive. Insurers defend considering this data, among other factors, because they say research shows a correlation with how likely you are to file a claim.
While the debate on price optimization continues, consumers might do well to bear in mind the advice of
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