To begin, the word “discrimination” has a number of negative connotations and typically implies that there will be some sort of prejudicial treatment of others in a negative way. However, the use of price discrimination or “price optimization” techniques particularly the use of credit scores has been seen as an attack on low-income individuals. There are currently three states that preclude the use of credit scoring, occupation or education level as part of the car insurance application process – Massachusetts, Hawaii and California and five that have ruled out price optimization or using consumer data in order to determine a consumers likelihood to shop for the lowest price – Florida, Indiana, Maryland, Ohio and Pennsylvania (Breitenbach, 2015). However, as was examined previously, these tools can effectively reduce rates for individuals that qualify based on the financial risk that they pose including claims and credit history. According to Robert Hartwig, President and economist of the Insurance Information Institute, price optimization can support the long-term price stabilization of the car insurance market and concludes that rates for all drivers and including those in the low to middle income range. Critics of the practice and consumer advocates maintain that lower income drivers are effectively penalized for factors like …show more content…
Data collection on the elasticity of demand and the ability to assess policy retention as well as the capacity to utilize price discrimination in the optimal sense will continue to produce the best possible rates for drivers as well as profitability for insurance companies. This paper has presented a number of studies that identify the areas of that need improvement and how best insurance carriers can control price elasticity in the market. The future of telematics as well as price disruptors will continue to make the industry better for stakeholders as well as consumers in the