Ensuring Fair Treatment for Pennsylvania Consumers

That consumers get a fair deal when buying insurance is crucial for families’ financial well-being and peace of mind, and also why I have recently taken two actions to ensure policyholders are treated fairly.

One action involves an issue in the news lately, the so-called widow’s penalty, where individuals have experienced auto insurance premium increases following the loss of a spouse. Some insurers have shown statistical evidence that single drivers are more likely to incur higher claims costs on average than married drivers, and thus charge single drivers more.

Some insurers that use this marital status rating factor consider widows and widowers to be in the single category, resulting in higher premiums following the loss of a spouse. However, I believe the loss of a spouse is very different from when someone is a young, single driver who has never married. I find raising premiums in this situation unfair.

I recently established a policy calling for review of insurance rate filings that propose to charge a widow or widower a higher rate solely based on this change in marital status. If the insurer cannot provide statistical support for including widows and widowers in the single category, I will not approve the rate change, and will require the insurer to continue using the lower rate.

Rating differences due to marital status are just one factor that can cause auto premiums to change following the loss of a spouse. For example, when a couple is on a policy, their driving records are considered together when determining the premium. When one spouse dies, the premium will change to reflect the risk of the remaining driver. If that driver has a better driving record than their spouse, the premium may go down, but the premium could increase if the surviving driver has a worse record, with more accident claims filed. Many companies also offer discounts for combining multiple policies, such as life and auto policies. If the deceased spouse had a life policy that is paid out, the multi-policy discount may go away.

While there are reasons a surviving spouse’s auto insurance premium may rise following the death of a spouse, I encourage policyholders to discuss such rate hikes with their insurer, and if dissatisfied with the response, shop around in Pennsylvania’s vibrant insurance market.

Customer loyalty should be valued, not penalized, which is why I took a second action and issued a notice to insurers, reminding them price optimization is illegal in Pennsylvania, and I will not approve rate filings including such practices.

Pennsylvania law says all policyholders presenting essentially the same hazard must be charged the same rate. The use of sophisticated computer software to identify consumers, or groups of consumers, as being less likely to shop for other insurance, and then charge these consumers higher premiums – called price optimization – is considered unfairly discriminatory.

My department issued consumer alerts and news releases on these issues. I believe consumer education helps both consumers and insurers. An educated consumer doesn’t necessarily mean one who will buy less insurance, but one who will buy the right insurance.

Educated consumers support a robust, competitive market, creating more opportunities for companies and producers. That is what we have in Pennsylvania, and through this consumer focus, I am striving to make our insurance market even better.