Senate Bill 1013 Safeguards Michigan Consumers, Prevents Insurers from Setting Their Rates Using Factors Unrelated to an Insured’s Risk of Loss or Expense
On September 21, 2026, Governor Gretchen Whtmer signed into law Senate Bill 1013, legislation that prohibits insurance companies from using price optimization when setting rates, protecting Michigan consumers against exploitative car insurance billing tactics. Price optimization occurs when an insurance company sets rates based on what it believes a consumer will tolerate paying, oftentimes unfairly penalizing loyal customers with higher rates or offering discounts only to those who threaten to leave their policy and find a new insurance provider. In other words, the new law bans insurers from charging a customer more based on them being a loyal customer than they would charge someone who is actively comparison shopping.
“Insurers use price optimization to unfairly raise the rates of unsuspecting customers just because they know they can – all the while Michigan drivers are already paying some of the highest car insurance premiums in the nation,” said state Sen. Jeremy Moss (D-Bloomfield Twp.), sponsor of SB 1013. “These strong consumer safeguards will protect Michiganders from unfair practices that are squeezing their paycheck. I’m proud the governor signed my bill into law.”
Price optimization generally refers to an insurer’s practice of varying premiums based upon factors that are unrelated to an insured’s risk of loss or expense to charge the highest price that an insured will tolerate. Often, but not always, it involves data analysis as a method of predicting when an insured will seek coverage from another insurer when the new or renewal premium increases too much. Price optimization includes insurers using an individual insured’s response to previous premium increases to determine how much of a premium increase the insured will tolerate at renewal. In some circumstances, insurers use a “price elasticity of demand” model in which similarly situated insureds are charged differing premiums for the same coverage based upon the insured’s likelihood of switching to another insurer.
Under the law, using price optimization in any way in ratemaking is classified as an unfair method of competition and an unfair or deceptive act or practice in the business of insurance. Price optimization would include any of the following:
- Considering the likelihood that the insured will engage in activities that result in insurance policy turnover.
- Estimating the willingness of the insured to pay a higher premium compared to other insureds.
- Using any measure of a consumer’s or group of consumers’ price elasticity of demand.
“Engage in activities that result in insurance policy turnover” includes, but is not limited to, any of the following:
- Shopping with other insurers for a lower premium.
- Canceling a policy before the expiration of the policy term.
- Failing to renew a policy at the renewal of the policy term.
- Complaining to the insurer or the insurer’s agent or representative.
The bill codifies a Michigan Department of Insurance and Financial Services 2024 bulletin and protects Michigan ratepayers from this unfair practice. Twenty other states currently ban exploitative rate-setting practices that penalize unsuspecting customers.
“The newly enacted bill represents another important step in strengthening consumer protections for Michiganders,” said DIFS Director Anita Fox. “This new law codifies the consumer protections outlined in DIFS’ 2024 bulletin and bans insurers from unfairly increasing premiums based on what customers are willing to pay. These safeguards help ensure that every Michigander can trust that their insurance rates are based on factors related to the risk of loss or expense.”
Under the Michigan Insurance Code, if the Director of the Department of Insurance and Financial Services (DIFS) determines that a person has engaged in prohibited methods of competition or unfair or deceptive acts or practices, the Director must issue an order requiring the person to cease and desist from engaging in that method of competition, act, or practice. The Director also may order a refund of any charges, fines, and suspension or revocation of the person’s license or certificate of authority if the person knowingly and persistently engaged in prohibited methods of competition or unfair or deceptive acts or practices.
Sources:
Governor Whitmer Press Release, “Gov. Whitmer Signs Bills Protecting Renters from Excessive Fees on Rent,” September 21, 2026
Michigan Department of Insurance and Financial Services Press Release, “DIFS Director Anita Fox Commends New Law Prohibiting Price Optimization to Strengthen Consumer Protection,” September 23, 2026
Michigan Department of Insurance and Financial Services Bulletin 2024-09-INS
