Pa. insurance chief warns consumers of ‘loyalty penalty’ overcharges

Pennsylvania’s insurance commissioner is sending a strong warning to insurance companies against using complacency as an excuse to raise prices.

Insurance Commissioner Teresa Miller said the practice — known as price optimization — involves insurance companies raising prices on customers who don’t comparison shop.

“Some insurers use sophisticated computer software based to some degree on how willing customers may be to shop around for a better price,” she said.

That’s illegal, she said, because in Pennsylvania everyone with the same risk must be charged the same price for insurance.

“We have previously denied filings where we’ve seen evidence of price optimization,” Miller said. “What we recently did is issue a notice reminding insurers that this practice is not allowed in Pennsylvania.”

Miller advised consumers to shop around for insurance to make sure they aren’t paying “a loyalty penalty” for staying with the same company for too long.

“Essentially, the practice of price optimization amounts to a loyalty penalty for consumers.  Because if a company thinks that someone won’t shop around, they charge them more,” she said. “That’s the idea.”