Governor Abbott Reminds Insurers Of Price Optimization Ban Under Texas Law

~ In response to Governor Greg Abbott's directive to make property insurance more affordable, the Texas Department of Insurance (TDI) has issued a reminder to insurers that the practice of "price optimization" is illegal for all TDI-regulated insurance products. This announcement comes after the governor expressed concern over the rising cost of homeowners' insurance premiums in Texas.

According to Governor Abbott, the average annual homeowners' insurance premium in Texas has increased by 79 percent in just six years. He believes that price optimization, which involves varying premiums based on factors unrelated to a policyholder's risk or expenses, is driving up costs for loyal customers. The governor stated that insurance companies should base rates on risk rather than how much extra money they think a customer will pay.

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The TDI Commissioner's latest Bulletin serves as a reminder to all insurance companies, agents, and representatives that using price optimization in the ratemaking or pricing process is considered unfairly discriminatory and a violation of the Texas Insurance Code. The bulletin also emphasizes that premiums must be based on the actual cost associated with risk.

Governor Abbott has made it clear that TDI will take enforcement action against any company found using price optimization. He also plans to work with the Legislature in the next session to enhance consumer protections for insurance policyholders and curb premium increases.

This move by Governor Abbott and TDI aims to make property insurance more affordable for Texans and ensure fair practices within the industry. With these measures in place, it is hoped that homeowners will see a decrease in their insurance premiums and have better protection against unfair pricing practices.

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