A New York regulator has raised concerns that car and property insurers may be engaging in illegal pricing practices and overcharging consumers who they deem less likely to consult multiple sources and compare rates.
 
The Wall Street Journal reports that Department of Financial Services Superintendent Benjamin Lawsky, a “top financial watchdog,” has issued a letter to hundreds of insurers inquiring about the mathematical formulae used to determine how potential clients’ purchasing habits.
 
Lawsky writes that he is hoping to assess whether the insurance firms engaged in “unfairly discriminatory” price optimization.
 
This action is seen as preemptive, since informal price optimization is commonplace in some sectors, but expansive data now presents the opportunity for companies to have a deeper understanding of how consumers will react to different price points.
 
“If it is happening, it is potentially unfair and we would probably want to take some action,” Lawsky told WSJ.
 
A spokesperson for the Insurance Information Institute, however, feels that analytics are necessary for insurers to remain viable in a competitive market, and believes shoppers of all income brackets compare prices before buying insurance.
 
“Consumers, including lower income policyholders, are savvy and know that shopping for insurance can potentially result in significant savings,” said Robert Hartwig, president of trade group Insurance Information Institute.