Skip to Content

Maryland Insurance Administration Prohibits Use of Price Optimization to Rate Property & Casualty Insurance Policies

On October 31, the Maryland Insurance Administration (MIA) issued Bulletin 14-23 (the "Bulletin") to property and casualty insurers. It prohibits the use of price optimization in setting rates for policies issued in Maryland. 

The term "price optimization" is defined as the practice of varying rates based on factors other than risk of loss, including but not limited to:

  • the likelihood that a policyholder will engage in activities that result in policy turnover; and
  • the willingness of a policyholder to pay a higher premium compared to other policyholders.

The Bulletin defines the phrase "engage in activities that result in policy turnover" to mean activities including, but not limited to:

  • shopping with other carriers for a lower premiums;
  • cancelling a policy before the policy term's expiration; and
  • failing to renew a policy at the renewal of the policy term.

According to the Bulletin, insurers are analyzing policyholder behavior patterns to predict whether a policyholder is likely to switch insurers if the insurer increases premiums. Based on that analysis, the insurer charges a lower premium to retain the policyholder who is likely to switch (as compared to the  policyholder who is considered unlikely to switch). As a result, using price optimization to set rates could mean insureds with like risk characteristics are charged different premiums, which constitutes unfair discrimination in violation of § 27-212(e)(1) of the Maryland Code.

The Bulletin requires every insurer in Maryland that currently uses price optimization to set rates to file a detailed corrective action plan no later than January 1, 2015. 

This action by the MIA reflects the insurance industry's growing use of big data, and the care that must be taken if that data is being used to differentiate among insureds in a way that is not based on traditional insurance concepts.
©2024 Carlton Fields, P.A. Carlton Fields practices law in California through Carlton Fields, LLP. Carlton Fields publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information and educational purposes only, and should not be relied on as if it were advice about a particular fact situation. The distribution of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship with Carlton Fields. This publication may not be quoted or referred to in any other publication or proceeding without the prior written consent of the firm, to be given or withheld at our discretion. To request reprint permission for any of our publications, please use our Contact Us form via the link below. The views set forth herein are the personal views of the author and do not necessarily reflect those of the firm. This site may contain hypertext links to information created and maintained by other entities. Carlton Fields does not control or guarantee the accuracy or completeness of this outside information, nor is the inclusion of a link to be intended as an endorsement of those outside sites.


The information on this website is presented as a service for our clients and Internet users and is not intended to be legal advice, nor should you consider it as such. Although we welcome your inquiries, please keep in mind that merely contacting us will not establish an attorney-client relationship between us. Consequently, you should not convey any confidential information to us until a formal attorney-client relationship has been established. Please remember that electronic correspondence on the internet is not secure and that you should not include sensitive or confidential information in messages. With that in mind, we look forward to hearing from you.