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An official bulletin issued by Colorado Insurance Commissioner Marguerite Salazar to insurance companies that prohibits insurance companies banning price optimization techniques in rating customers, is being praised by a consumer group.

Price optimization is defined at the use of mathematical analysis to determine how customers will respond to pricing and services and it is used to determine prices that will maximize a profit.

Any insurer currently using price optimization must submit a new rate filing to the Division of Insurance within 90 days of the issuance of the bulletin, and insurers that fail to comply and are later determined to be using price optimization may be subject to disciplinary action, according to the bulletin.

The Consumer Federation of America, which praised the commissioner’s move, is urging Salazar to explicitly bar the use of price optimization in underwriting as well.

Colorado is the 15th jurisdiction to notify insurers that price optimization violates state insurance statutes. Maryland, California, Ohio, Florida, Vermont, Washington, Indiana, Pennsylvania, Maine, Washington, D.C., Rhode Island, Montana, Delaware and Minnesota have previously issued notices to insurers cautioning them about price optimization.

Related:

• Price Optimization Allegations Challenged, NAIC Investigating Practice
• Florida Bans Price Optimization; Insurers Question Definition
• Delaware Bans Use of Price Optimization in Insurance Pricing
• District of Columbia Issues Price Optimization Ban Bulletin
• California Commissioner Tells Insurers to Cease Price Optimization