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Alaska Issues Price Optimization Bulletin Based on NAIC Model

Dec. 23, 2015 AAIS Advisory notice

The Alaska Division of Insurance has issued a bulletin informing personal lines insurers that the use of  rating factors unrelated to expected losses, expenses, or policyholders' risk may be deemed unfairly discriminatory and, thus, illegal.

The bulletin draws heavily on a model bulletin on page 20 of a white paper on price optimization recently issued by a task force of the National Association of Insurance Commissioners (NAIC).

Using NAIC language, the Alaska bulletin states that certain rating factors commonly used for price optimization are "inconsistent" with Alaska law on insurance rating. But, unlike in other states, the bulletin stops short of categorically prohibiting price optimization and has no provision explicitly calling for insurers to replace rating plans that may have elements of price optimization.

AAIS Advisory notices are posted periodically to announce AAIS product developments, and to provide news items that are relevant to our program users. Advisory notices are news summaries that paraphrase documents which should be consulted directly for complete, authoritative information. 

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