Ohio Insurers Using Price Optimization Must Resubmit Compliant Rates No Later Than June 30, 2015

Feb 6, 2015

In a news release today, February 6, 2015, Ohio Lieutenant Governor and Department of Insurance Director Mary Taylor reminded Ohio insurers that the use of price optimization techniques can result in unfair discrimination.  Last week, she issued Bulletin 2015-01, which noted that the use of price optimization by insurers violates Ohio law.

Pursuant to the Bulletin, insurance companies that use price optimization techniques in Ohio must end this practice and resubmit rates compliant with the bulletin no later than June 30, 2015.

A copy of Ohio’s bulletin is available at www.insurance.ohio.gov/Legal/Bulletins/Documents/2015-01.pdf.

Price optimization is an insurance company’s practice of varying premiums based upon factors such as whether a consumer has complained about a policy or the amount or percentage change of the consumer’s premium over prior years.  According to the Ohio Department of Insurance, this is done in order to charge each insurance consumer the highest price the market will bear and represents a departure from traditional cost-based rating, which can result in two insured people with similar risk profiles being charged different premiums.  Ohio law, however, requires premiums to be based on the risk that the consumer brings to the company and prohibits unfair discrimination.

“It is our duty to protect Ohio insurance consumers and we take that important role very seriously,” Lieutenant Governor Taylor said.  “We have been actively monitoring and involved in the discussion on this topic at the national level and took steps to clearly specify our expectations of the industry.  This type of unfair discrimination violates Ohio law.”

Ohio becomes the nation’s second state to ban this pricing practice, following a Maryland ban ordered in October 2014. 

Lieutenant Governor Taylor’s action was applauded by the Consumer Federation of America and Center for Economic Justice, which characterized price optimization as “big data run amok,” reiterated their positions that, since most Americans are required to buy auto and homeowners insurance, it is important that insurance commissioners protect consumers from unfair practices.  The groups also urged other states to follow Ohio’s lead.

To read the Consumer Federation of America news release, click here.


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