Members of the insurance industry are not looking favorably on legislative attempts to regulate the practice of price optimization by property/casualty insurers in Nebraska.
LB 1041 proposes to “discriminate between risks based on price optimization,” defined as the use of factors to help determine an insured’s premium that are not specifically related to the consumer’s risk or hazard. That includes, but is not limited to “an insured’s propensity to shop for insurance, ask questions, or file complaints in response to an increase in such insured’s premiums.”
The American Insurance Association testified against the bill Tuesday, expressing concern that the new legislation is overly expansive and could actually hamper effective insurance regulation.
“We are concerned that the inclusion of the phrase ‘including, but not limited to’ is overly expansive, meaning that almost anything could be construed to be the practice of price optimization,” Steve Schneider, AIA’s Midwest region vice president, testified.
“Insurers already operate in a heavily regulated environment, so the uncertainty of this vague phrase is troublesome. If enacted, this language could perplex insurers and handcuff the authority of the state insurance department to effectively regulate insurer practices.”
The practice of price optimization is heavily debated among insurance regulators, industry professionals and consumer advocacy groups. The National Association of Insurance Commissioners even produced a comprehensive white paper on the subject that included specific recommendations to state insurance departments on how to regulate the practice.
These suggestions include enhancing existing state rate review and analysis regulator practices. To date, 14 states and the District of Columbia have issued regulatory bulletins addressing price optimization.
“Nebraska’s current insurance marketplace and regulatory climate is presently rated sixth best among all 50 states, making it one of the best in the nation for both consumers and insurers,” Schneider said. “This high ranking is due to the fact that the state’s insurance regulatory system is already so well enforced by the state insurance department.
“We encourage Nebraska legislators to avoid adding vague language regarding price optimization and stick to its current model which is effective and highly rated.”
