TDI issues guidance to safeguard consumers from discriminatory pricing

The Texas Department of Insurance (TDI) issued a bulletin reminding insurance companies that it's illegal to use factors other than insurance risk to set home and auto insurance rates.

"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," said Insurance Commissioner Amanda Crawford. "Insurance is about pricing risk, not pricing the customer."

Insurance companies consider many factors to calculate how much they'll charge. Common factors for home insurance are your home's age, location, replacement cost, and claim history. For auto insurance, this includes your claims history, where you live, and your age and gender.

Using factors that aren't based on risk - commonly called price optimization - is considered "unfairly discriminatory" under Texas law.

One example of price optimization is charging long-term customers higher rates because the company assumes they're less likely to shop around.

The bulletin was one of five directives Gov. Greg Abbott issued to TDI on August 24 as part of his efforts to help make auto and home insurance more affordable.

Have a question about insurance? Call the TDI Help Line at 800-252-3439 or visit www.tdi.texas.gov.

Resources

• How are your auto and homeowners insurance costs calculated?
• Auto and home policy underwriting: Learn how companies set rates.
• Lower your car insurance rates: Tips for saving money
• Lower your home insurance costs: Tips for saving money