Michigan bans worth optimization for property and casualty insurers below a legislation that took impact instantly upon signing on September 21, 2026.
Senate Invoice 1013, sponsored by Senators Jeremy Moss, Mary Cavanagh, Stephanie Chang, Jeff Irwin, and Mallory McMorrow, amends the state’s insurance coverage code to categorise worth optimization as an unfair methodology of competitors and an unfair or misleading act or apply. It’s now Act 98 of the 2026 Public Acts.
So what precisely is worth optimization? Briefly, it’s the apply of setting premiums primarily based on how a lot a policyholder is keen to tolerate paying – somewhat than on actuarially justified elements tied to danger of loss or expense. The brand new Part 2027a of the Michigan Insurance coverage Code attracts a transparent line: if the pricing enter will not be about danger, it doesn’t belong in ratemaking.
The statute spells out three particular prohibitions. Insurers can not issue within the chance {that a} buyer will store round, change carriers, or cancel. They can not estimate a policyholder’s willingness to pay greater than different policyholders for a similar protection. They usually can not use any measure of worth elasticity of demand, whether or not for a person or a bunch.
The legislation additionally defines what counts as “actions that lead to insurance coverage coverage turnover” – the habits insurers are actually barred from predicting. That listing covers procuring with different insurers for a decrease premium, canceling earlier than time period, failing to resume at renewal, and complaining to the insurer or its agent.
Michigan is way from alone on this entrance. The invoice’s lead sponsor, Senator Moss, cited roughly 20 different states that already outlaw the apply. Michigan’s personal Division of Insurance coverage and Monetary Providers had already largely banned worth optimization via a March 2024 regulatory bulletin, however the brand new legislation codifies that place straight in statute – giving it the permanence of legislative authority somewhat than counting on regulatory interpretation alone.
For P&C carriers writing enterprise in Michigan, the compliance query is fast: any ranking algorithm that elements in policyholder retention habits, willingness-to-pay estimates, or demand elasticity must be scrubbed earlier than the following submitting cycle.
