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Insurers move toward individual risk pricing but face regulatory hurdles
Industry leaders say new data sources entering models in 2026 could enable more granular premiums, but state regulators must be assured the data will not be misused.
Property and casualty insurers are moving closer to pricing the risk of individual policyholders rather than relying on broad rating groups like similar home types or driver categories, according to Insurance Business. The shift is tied to an explosion of new data sources entering carriers’ pricing models in 2026, and industry participants say the data now exists to support risk segmentation near an individual level.
The underwriting approach varies widely across the market, Insurance Business reports. Judson Boomhower, an economics professor at the University of California, San Diego, has studied how major US insurers price wildfire risk and found wide variation in how finely carriers segment their books, ranging from highly granular models to broader categories that then correct for underwriting selection problems.
Insurers face cost and timing tradeoffs as they pursue more detailed pricing, Insurance Business notes. Boomhower said building and maintaining sophisticated granular pricing schedules is not free, and that regulatory approval adds another layer of expense, including the upfront cost and the effort required to receive approval in states with more stringent review processes.
The economic case for individualized premiums is that closer pricing to actual risk can provide stronger signals for mitigation actions like roof replacement or vegetation management, Insurance Business reports. However, Boomhower’s research characterizes the move as balancing potential gains against both implementation costs and a non-trivial regulatory burden to price in a particular way.