The Texas Department of Insurance (TDI) issued a bulletin reminding insurance companies that it is illegal to use factors other than insurance risk to set home and auto insurance rates, the agency said in a Sept. 1 news release.
“In Texas, we take pride in looking out for one another. When families are feeling the weight of property insurance costs, they deserve the confidence of knowing that their premiums are determined by genuine risk, not by pricing tactics that take advantage of customer loyalty,” Insurance Commissioner Amanda Crawford said in the release. “Insurance is about pricing risk, not pricing the customer.”
Insurance companies consider many factors to calculate how much they will charge, TDI said. Common factors for home insurance include a home’s age, location, replacement cost, and claim history, according to the agency. For auto insurance, they include claims history, where a customer lives, and the customer’s age and gender, TDI said.
Using factors that are not based on risk, commonly called price optimization, is considered “unfairly discriminatory” under Texas law, the agency said. One example TDI gave of price optimization is charging long-term customers higher rates because the company assumes they are less likely to shop around.
The bulletin was one of five directives Gov. Greg Abbott issued to TDI on Aug. 24 as part of his efforts to help make auto and home insurance more affordable, according to the release.
Texans with questions about insurance can call the TDI Help Line at 800-252-3439 or visit the agency’s website. TDI also pointed consumers to resources on how insurance costs are calculated, how companies set rates, and how to lower car and home insurance costs.