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Insurance companies setting auto insurance rates based on your likelihood of shopping for lower rates

The practice is being called price optimization, and it has nothing to do with the traditional risk based approach of setting your insurance premium.'s Herb Weisbaum explains it in an article titled Data mining is now used to set insurance rates; critics cry foul

 Hunter, a former Texas insurance commissioner, claims this allows insurers to predict if they could get away with higher rates on low-income customers who have fewer market choices because of factors such as where they live, their socioeconomic status or their financial literacy.

"What we're seeing here is a way to take advantage of the fact that some people don't shop for insurance and that's wrong." Hunter said. "It produces unfairly discriminatory rates which are illegal." 


So it seems that insurance companies are forcing some customers to pay higher premiums solely based on their "mining" data research. This data tells them whether you are likely to regularly shop around for lower insurance quotes. If you are not likely to shop around for lower rates (usually due to geographic location, economic status, etc), you will most likely be paying more than someone else who can regularly check for lower rates.

According to a survey done in 2013, 45% of the largest insurance companies currently use this price optimization strategy.

A 2013 marketplace survey done by Earnix, a global leader in price optimization, found that 26 percent of all auto insurance companies and 45 percent of the large insurance companies (more than $1 billion in annual revenue) in North America currently optimize their prices. An additional 36 percent of all companies surveyed said they plan to do this in the near future.  


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