Before insurance pricing became more advanced—with the advent of tools like Generalized Linear Models and credit-based scores—observers were debating whether auto and home insurance pricing was fair. For example, some states restricted pricing by location. Others banned use of gender. Some outlawed education and occupation as rating factors. Regulations try to ensure equal outcomes, even when increased risk is caused by behavior, not bias.
Today carriers have more data, powerful predictive models, and AI. People are suspicious of these tools and how they are used. But in 41 years of pricing insurance, I have never seen an executive intentionally use data to discriminate based on religion, race or other long-protected classes. If anything, the industry's bias is in low expectations: carriers often underestimate their customers. They don't differentiate offerings so that insurance buyers can consider more than price at purchase.
Insurers use new data and tools to charge higher prices to people likely to generate more losses. Improved price accuracy creates smaller, more precise risk groupings. Smaller groups often means much higher prices for those in a high-risk group—prices some buyers cannot afford. High risk customers are forced to buy less coverage. When segmentation conflicts with making financial risk affordable, we drift from the original risk-pooling goal of insurance.
Pricing practices can feel less like fairness and more like punishment, particularly when it penalizes customers who need coverage most.
So why are insurers surprised when customers get upset?
If you were paying more for less coverage, would you be happy?
Maybe the real bias is how insurers think about their product. They focus too much on lowering prices rather than creating better products—products people would value and be willing to pay more for. Instead of asking what customers want, carriers assume cost is paramount. Insurers may not use bias in pricing, but they may be biased against innovation that benefits buyers. We default to reducing costs over building unique value.
Sometimes the data is right: risk-driven high-priced clients should not be subsidized by those who present less risk to a pool of customers. If a carrier does not charge enough, they risk adverse selection. Disproportionate growth in unprofitable segments forces a carrier to raise prices for everyone.
In some ways, new technology is exacerbating an old problem. Insurance carriers have to say "no" sometimes. Insurers cannot cover what they do not price for or what is uninsurable. If they did, no one could afford insurance. Policies limit coverage to protect against large, rare events—not to cover upgrades, but to protect people from unexpected events beyond what they can survive financially.
This creates negative experiences. Carriers turn away or charge lofty premiums to high-risk customers. Most deny claims that fall outside coverage. Too often, insurers use technology to help screen out risk, automate denials, and protect margins.
What if an insurer used technology to create more compelling products, satisfying experiences, and stronger relationships with customers? Why do carriers keep using data and technology to create negative experiences?
Technology gives insurers a chance to do better. They can now:
- Price risks more accurately than ever
- Make buying insurance faster and easier
- Create new products and services that customers would be surprised and delighted to get from their insurer.
Some insurers ask dozens of questions just to give a quote, then more questions after the quote. Pricing models are tuned to the accuracy of the information. So, we verify the information using data and technology. So, carriers spend time and money in either "rate pursuit" or confirming eligibility. Customers asked for detailed information they may not have are then told they are wrong. The fact checks change the price after binding.
Claims aren't much better. Loss reporting can be laborious. While the claim is being handled, communication can be limited, slow, and confusing. The process can feel opaque and adversarial—at the exact moment customers expect clarity and support. No wonder people turn to lawyers.
Can technology fix this? Yes.
So what would insurance look like if it were built entirely around customer experience?
What if customers didn't need to understand their policy?What if the process were simple and even enjoyable?What if success were measured by customer satisfaction, not just profit?
The most successful insurers of the future will think this way. They will focus on a unique service or coverage they offer to customers and build their organization, people and processes around it. You can differentiate in new services, superior financial strength, customization, simplicity, or better understanding a particular segment
Companies can grow and succeed when they break from the pack. You can resist copying others and stay focused on what makes them uniquely valuable to customers.
So instead of using technology only to cut costs or avoid risk, why not use it to build something customers actually value and are willing to pay more for?
