Governor Greg Abbott announced that the Texas Department of Insurance has reminded insurers that "price optimization" — varying premiums based on factors unrelated to risk — violates state law.
The directive comes as homeowners' insurance premiums in Texas have risen 79 percent over six years, according to the governor. Price optimization occurs when insurance companies increase rates based on whether a customer is likely to shop for a new policy or accept a higher price, rather than on the customer's actual risk of loss.
"Insurance companies must base rates on risk, not on how much extra money they think a customer will pay," Abbott said in a statement. Under Texas law, two policyholders with the same risk profile cannot receive different premium increases.
The Texas Insurance Code prohibits unfairly discriminatory pricing practices. The Texas Department of Insurance will take enforcement action against companies that use price optimization in setting rates or rating plans.
Abbott said he plans to work with the legislature next session to strengthen consumer protections and address continued premium increases.