Michigan Bans Price Optimization: What the 2026 Law Means for Drivers

This article is based on Michigan’s enacted law, the Department of Insurance and Financial Services (DIFS) guidance, and the statutory enforcement provisions listed under Sources. A premium increase alone does not establish that an insurer used prohibited price optimization.

Michigan’s Public Act 98 of 2026, enacted as Senate Bill 1013 and effective September 21, 2026, puts the state’s prohibition on insurance price optimization into statute. The practice involves adjusting rates based on an insured’s willingness to pay when the adjustments are not actuarially justified and rely on factors unrelated to risk of loss or expense. The law does not guarantee that premiums will fall, and not every increase for a long-time customer is a violation.

What is price optimization in auto insurance?

Price optimization refers to using information about how much a customer may be willing to pay, including whether the customer is likely to shop around, to adjust a premium in a way that is not justified by actuarial risk or expense factors. DIFS described the practice in Bulletin 2024-09-INS, issued March 6, 2024, and said it was not permitted under Michigan law as unfairly discriminatory. Public Act 98 of 2026 now adds an express statutory prohibition. The department says it reviews auto, homeowners, and other property and casualty insurance rate filings for this practice. New York’s rate-approval rules are a separate regulatory issue.

What exactly does Michigan’s new law prohibit?

Section 2027a of the Insurance Code says it is an unfair method of competition and an unfair or deceptive act or practice for a property and casualty insurer to use price optimization in ratemaking. The statute defines price optimization as charging based on an insured’s price tolerance when that produces rate or premium adjustments that are not actuarially justified and are based on factors unrelated to risk of loss or expense.

The statute lists examples such as considering how likely an insured is to shop with another insurer, cancel before the policy term ends, fail to renew, or complain to the insurer or its representative; estimating whether the insured is willing to pay more than other insureds; and using measures of a consumer’s or group of consumers’ price elasticity of demand. These examples are part of the law’s definition and should be read together with its actuarial-justification and risk-relatedness requirements.

What are the penalties and how is the law enforced?

Public Act 98 makes price optimization an unfair or deceptive insurance practice under Section 2027a; it does not set out a separate penalty schedule in that new section. Enforcement may proceed under Section 2038 of Michigan’s Insurance Code, which applies to prohibited practices under Sections 2001 through 2050. After an opportunity for an administrative hearing, DIFS may order the person to cease and desist and may order a monetary penalty of up to $1,000 per violation, with an aggregate cap of $10,000. If the person knew or reasonably should have known of the violation, the statute allows up to $5,000 per violation and up to $50,000 for all violations committed in a six-month period. Section 2038 also provides for license suspension or revocation in qualifying cases and refunds of overcharges.

These are potential statutory remedies, not an automatic fine for every premium increase. DIFS said it reviews auto, homeowners, and other property and casualty rate filings and would take appropriate regulatory action against insurers that use price optimization. As of the latest DIFS announcement reviewed for this article, the department had not described a separate public enforcement timetable specifically for past price-optimization decisions.

What should Michigan drivers do now?

If your premium increases, review the renewal documents before assuming the insurer broke the law. Check for changes in coverage, vehicle use, address, claims, discounts, and other rating details. You can then ask the insurer in writing to explain the main factors used to set the premium. You may also compare quotes with equivalent limits and deductibles. If you believe the insurer used prohibited price optimization, you can contact DIFS.

Michigan’s price-optimization law addresses how insurers may set premiums. It is distinct from proposals targeting other cost drivers, such as the Stop Auto Fraud Act of 2026, which concerns staged-crash insurance fraud.

How we verified this article

We reviewed Michigan Public Act 98 of 2026 (Senate Bill 1013), DIFS Bulletin 2024-09-INS issued March 6, 2024, DIFS’s September 23, 2026 announcement, and Section 2038 of the Michigan Insurance Code for the general administrative remedies and penalties applicable to unfair or deceptive insurance practices. The new law took effect immediately upon signing on September 21, 2026. The penalty figures in this article come from the general enforcement provision, not from a separate penalty schedule in Section 2027a.

Frequently Asked Questions About Michigan’s Price Optimization Law

Does Michigan’s price optimization law mean my auto insurance rate will go down?

Not necessarily. The law prohibits a specific pricing practice: adjustments based on an insured’s price tolerance that are not actuarially justified and rely on factors unrelated to risk of loss or expense. It does not require insurers to lower rates or cap premiums.

How do I know if my insurer used price optimization?

You may not be able to tell from a renewal notice alone. Ask your insurer in writing to explain the main rating factors used to set your premium. If you suspect an unfair practice, you can file a complaint with Michigan DIFS.

Does Michigan’s price optimization law apply to homeowners insurance?

Yes. The law applies to property and casualty insurers’ ratemaking, and DIFS says it reviews auto, homeowners, and other property and casualty insurance rate filings for price optimization.

What should I do if my insurance rate went up and I suspect price optimization?

A premium increase alone does not prove a violation. Ask the insurer to explain the main rating factors, compare equivalent coverage from other insurers, and contact DIFS if you believe the insurer used a prohibited practice.

When did Michigan’s price optimization law take effect?

Senate Bill 1013, enacted as Public Act 98 of 2026, took effect immediately when signed on September 21, 2026.

The Bottom Line for Michigan Drivers

Michigan’s Public Act 98 of 2026 codifies the state’s prohibition on insurance price optimization. Insurers may not use price-tolerance adjustments that meet the law’s definition, including certain predictions about whether a customer will shop around or tolerate a higher premium. The law does not guarantee lower prices, and a premium increase by itself is not evidence of a violation. Review the details of your renewal, ask your insurer to explain the main rating factors, compare equivalent coverage, and contact DIFS if you have specific concerns.