Back to News
Texas TDI NewsState DOITX
TDI issues guidance to safeguard consumers from discriminatory pricing
Plain English Summary
The Texas Department of Insurance (TDI) has reminded insurance companies that they cannot use unfair pricing practices when setting home and auto insurance rates. This means that rates should only be based on actual risk factors, like a home’s age or a driver’s claim history, rather than on customer loyalty or other unrelated factors. This practice, known as price optimization, is illegal in Texas. Insurance Commissioner Amanda Crawford emphasized that families should feel confident that their premiums reflect true risk, not pricing strategies that take advantage of them. Agents should ensure their companies comply with these guidelines to protect consumers and avoid penalties.
+View original text
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