Moss introduces bill to ban ‘predatory’ price optimization by insurance companies

State Sen. Jeremy Moss (D-Bloomfield) introduced legislation this week to ban auto and home insurance companies from using a practice known as price optimization, one that Moss has called predatory.

The bill was the subject of testimony on Wednesday before the Senate Economic and Community Development Committee.

“Did you know that your rates may be even higher just because you’re a loyal customer to your insurance company?” Moss asked the committee during testimony emphasizing the impacts of the policy.

In a news release issued following the committee hearing, Moss said that “price optimization is a shady practice that allows insurance companies to exploit your shopping patterns to determine the highest rates you are willing to pay.”

“If they think you’ll renew your policy, they may hide rewards, discounts, perks and special offers from you — or worse, simply jack up your rates,” Moss added. 

Twenty other states outlaw the practice already. Senate Bill 1013 would see Michigan join them.

A Senate Fiscal Agency analysis of the bill explained that price optimization means establishing rates or varying premiums based on factors that are unrelated to a consumer’s risk of loss, including “considering the likelihood that the insured will engage in activities that result in insurance policy turnover” and “estimating the willingness of the insured to pay a higher premium compared to other insureds.”

That includes shopping with other insurers for a lower premium, canceling or failing to renew a policy before the expiration of the policy term, or complaining to an agent or representative of the insurance company.

In practice, the Michigan Department of Insurance and Financial Services already largely bans price optimization. A bulletin from the agency’s director in March 2024 states that its use is not permitted under Michigan law.

“Under the Michigan Insurance Code, rates for property and casualty insurance shall not be excessive, inadequate, or unfairly discriminatory,” the bulletin states. “A rate is unfairly discriminatory in relation to another rate for the same coverage if the differential between the rates is not reasonably justified by differences in losses, expenses, or both, or by differences in the uncertainty of loss for the individuals or risks to which the rates apply.”

Jennie Gies, the Legislative Liaison Manager for the Department of Insurance and Financial Services, told the Senate Economic and Community Development Committee that the goal of Moss’s legislation is to codify that bulletin into statute.