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The Michigan Department of Insurance and Financial Services (DIFS) published a Bulletin addressed to all property and casualty insurers writing business in the state, advising them that price optimization tactics used in ratemaking are not permitted under Michigan law. 

Price optimization is a method of using data of past consumer behavior in order to charge higher premiums. It analyzes how consumers have reacted to previous premium increases to predict how much the insurer can raise the premium before the consumer would shop for similar insurance from a different insurance company. Some insurers have used a “price elasticity of demand” model where some insureds have been charged higher premiums compared to similar insureds based on the insured’s likelihood of switching to another insurance company. These price optimization methods charge premiums based on data that is unrelated to a policyholder’s risk of loss.

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