As Troutman Pepper Locke recently reported, on September 2, 2026, the Texas Department of Insurance (TDI) issued Commissioner’s Bulletin # B-0007-26, addressed to all insurance companies and their agents and representatives, which stated TDI’s position that any use of price optimization in the ratemaking or pricing process is unfairly discriminatory and violates the Texas Insurance Code. Shortly thereafter, as Troutman also reported, on September 21, 2026, Michigan signed into law Senate Bill 1013, which amends the Michigan Insurance Code by adding Section 2027a to prohibit the use of price optimization in property and casualty insurance ratemaking. Unlike the Texas bulletin, which relied on existing ratemaking and anti-discrimination statutes, Michigan codified the prohibition as a standalone statutory provision.
In October 2026, two additional states issued guidance on the topic. On October 9, 2026, the West Virginia Offices of the Insurance Commissioner (OIC) issued Insurance Bulletin No. 26-03 (the WV Bulletin), and on October 12, 2026, the Washington Office of the Insurance Commissioner issued Technical Assistance Advisory 2026-011 (the TAA), addressed to property and casualty insurers doing business in Washington State. Like the Texas bulletin, both the WV Bulletin and the TAA rely on existing state law, rather than new legislation, to conclude that price optimization is unfairly discriminatory.
1. West Virginia Insurance Bulletin No. 26-03
The WV Bulletin states that “[i]t has come to the attention of the [OIC] that some property and casualty insurers issuing personal lines policies may be using ‘price optimization’ to rate insurance policies in West Virginia.” The WV Bulletin describes price optimization as “the practice of varying rates based on factors other than risk so that the company can charge the highest price that policyholders will tolerate before shopping for a new policy,” and notes that the practice includes considering “the elasticity of demand” to predict policyholder behavior (i.e., how sensitive a policyholder is to price changes and the likelihood that a policyholder will accept a premium increase or shop for a lower premium with a competitor). According to the WV Bulletin, the practice “can result in two policyholders with the same loss history and risk profile receiving different premium increases.”
The OIC “has determined that the use of price optimization results in rates that are unfairly discriminatory and in violation of West Virginia law.” The WV Bulletin states that “[i]nsurance rates are to be based on risk of loss and not on whether a consumer is likely to accept a higher price,” and that, “[w]hile insurers may employ sound actuarial judgment in setting rates, judgmental adjustments to a rate may not be based on non-risk-related policyholder characteristics.”
The WV Bulletin identifies two provisions of the West Virginia Code: Section 33-11-4(7)(c), which prohibits unfair discrimination “between insureds or subjects of insurance having substantially like insuring, risk and exposure factors or expense elements” in the rate or amount of premium charged, and Section 33-20-3, which governs ratemaking and provides that “[r]ates may not be excessive, inadequate or unfairly discriminatory.” Using language closely tracking the Texas bulletin, the OIC states that these provisions “show a clear intent that property and casualty insurers doing business in West Virginia must classify risks according to cost-based considerations of insurance losses and expenses, and that they must disclose those considerations fully in their rate filings.”
The WV Bulletin warns that “[f]ailure to fully comply with the code provisions enumerated herein is a violation of West Virginia law and appropriate enforcement action will be taken,” and states that the OIC “expects all property and casualty insurance companies operating in West Virginia to follow these laws and to not engage in the practice of price optimization.”
2. Washington Technical Assistance Advisory 2026-011
The stated purpose of the TAA is “to reaffirm guidance the agency issued in 2015 addressing the practice of price optimization.” The TAA explains that the 2015 guidance “noted that to the extent price optimization results in premiums, rates, or rating factors unrelated to cost and risk, it is unfairly discriminatory under Washington State law governing permissible rates.”
The TAA describes price optimization as “an insurer’s use of statistical analysis, often using non-insurance data, to estimate an insured’s sensitivity to price, and base the insured’s premium on their estimated price sensitivity, when there is no relation to expected costs.” As an example, the TAA cites “using statistical analysis of consumer behavior to determine the premium an insured would be willing to pay at renewal before they shop for a new policy.” The TAA notes that this practice “can result in two insureds receiving different premium increases, even though they have the same expected costs and risk profile,” and “can also result in increased premiums for insureds who keep their business with the same insurer — in other words, a loyalty penalty.”
The TAA relies on RCW 48.19.020, which requires that premium rates “are not excessive, inadequate, or unfairly discriminatory,” and WAC 284-24-065(1), under which a rate is reasonable and not excessive, inadequate, or unfairly discriminatory “if it is an actuarially sound estimate of the expected value of all future costs associated with an individual risk transfer.” The TAA concludes that “an insured’s premium must be based on cost associated with risk,” and that “[c]harging different premiums to insureds based on their expected price sensitivity does not reflect a genuine difference in expected cost incurred by the insurer.” The TAA states that this practice is considered by the Insurance Commissioner “to be unfairly discriminatory and in violation of Washington State law,” and that “[r]ates that are unlawfully discriminatory will not be approved.”
The TAA notes that it is “an interpretive policy statement released to advise the public of the OIC’s current opinions, approaches, and likely courses of action” and that “[i]t is advisory only.”
3. Conclusion
With the issuance of the WV Bulletin and the TAA, four states have addressed price optimization since September 2, 2026. Michigan has enacted an express statutory prohibition, while Texas, West Virginia, and Washington have each issued regulatory guidance concluding that price optimization is unfairly discriminatory under existing ratemaking and anti-discrimination laws. Each of the three regulatory pronouncements describes price optimization as a practice that can result in policyholders with the same risk profile receiving different premium increases. West Virginia’s guidance expressly states that enforcement action will be taken for noncompliance, and Washington’s guidance states that unlawfully discriminatory rates will not be approved.
