“In this case, Allstate’s model seemed to determine how much a customer was willing to pay —or overpay—without defecting, based on how much he or she was already forking out for car insurance. “
“In the 1990s, insurers began using external data sources like credit scores to predict accident risk. Since then, rate filings have become increasingly filled with proprietary, opaque algorithms, according to regulators.”
“If a behavior in another sphere of life affects insurance premiums in a way that consumers can’t readily anticipate,” he said in an interview, “that could lead to a cascade of financial consequences arising from what seems to be an innocuous decision.”
“Patty Born, a professor studying insurance regulation at Florida State University’s College of Business, doubts insurers will ever share enough information about their pricing models to allow customers to know if they’re overpaying. She said the only defense is to regularly check competitors’ rates.”
*When there is a lot of money on the table there will be creative strategies employed to get more.