Insurance is a different kind of product. You need it to get a mortgage and you're supposed to have it to drive a car. That's why the industry is highly regulated.
You might not like the price you pay for your home or auto insurance policy, but by law those premiums must be based on actuarial risk—the expected cost to provide you that coverage.
Some insurance companies now use sophisticated software to help them set their rates. The industry says the process, called "price optimization," is simply a way to be more efficient. Consumer advocates believe it's being used to get around risk-based pricing.
The Consumer Federation of America (CFA) and the Center for Economic Justice call price optimization an "unfair and discriminatory" way to overcharge policyholders and they want the process banned.
Robert Hunter, CFA's director of insurance, says price optimization is a data mining tool that lets insurance companies figure out which groups of customers are more likely to accept a price increase and which are more likely to shop around for a new policy.
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Hunter, a former Texas insurance commissioner, claims this allows insurers to predict if they could get away with higher rates on low-income customers who have fewer market choices because of factors such as where they live, their socioeconomic status or their financial literacy.
"What we're seeing here is a way to take advantage of the fact that some people don't shop for insurance and that's wrong." Hunter said. "It produces unfairly discriminatory rates which are illegal."
If you have two people with the exact same risk factors, Hunter explained, they should be charged the same rate. But using price optimization, the customer who is tagged as the one least likely to switch carriers in the face of a rate hike would be charged more.
"It's wrong, because it unfairly discriminates," he said.
Birny Birnbaum, executive director of the Center for Economic Justice, calls price optimization "a euphemism for price gouging."
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"It's unfair because it has nothing to do with your cost to the system—your likelihood of a claim—and everything to do with your market power or lack of market power," Birnbaum said.
The insurance industry insists there is nothing nefarious about price optimization.
Robert Hartwig, president of the Insurance Information Institute, said the process does not discriminate and does not abandon the core principle of risk-based pricing. It simply provides "more precision in the process associated with pricing and it allows insurers in an analytical way to deal with what-if scenarios."
"I take issue with the notion that somehow there's something going on here that disadvantages consumers, when in fact consumers have more information at their fingertips than they ever had before in the history of the insurance industry," Hartwig said. "The notion that poor people are somehow disadvantaged by this is equally absurd."
So, how widespread is this practice?
There's no way to know for sure which companies use price optimization because they are not required to provide this information to state regulators—and they don't.
A 2013 marketplace survey done by Earnix, a global leader in price optimization, found that 26 percent of all auto insurance companies and 45 percent of the large insurance companies (more than $1 billion in annual revenue) in North America currently optimize their prices. An additional 36 percent of all companies surveyed said they plan to do this in the near future.
Meryl Golden, Earnix's general manager for North America, told CNBC.com there is no reason for companies to disclose when they use these analytics for price setting.
"Nothing has changed; prices are still based on risk," Golden said. "Price optimization is a statistical technique that's used by insurance companies to augment their judgment and make better decisions in the rate-setting process. And the same actuarial, regulatory and consumer protection standards apply as they always have."
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Critics say price optimization is all about maximizing profits and they point to a 2012 Earnix advertisement in Best's Review magazine that featured Golden. "Companies that adopt price optimization realize substantial financial benefits," it said.
Both Earnix and the Insurance Information Institute claim the insurance market has never been more competitive or transparent about pricing, and they don't see what all the fuss is about.
Last month the Consumer Federation of America and the Center for Economic Justice presented their findings to a meeting of the National Association of Insurance Commissioners (NAIC) and called on them to immediately prohibit the use of price optimization software.
No one from NAIC would talk to CNBC.com about price optimization. In an email, a spokesperson said the group will continue looking into the issue.
"It's pretty astonishing that there hasn't been a rapid response from insurance regulators to stop the practices," the Center for Economic Justice's Birnbaum said. "Why don't they see the urgency in this?"
—By CNBC contributor Herb Weisbaum. Follow him on Facebook and Twitter @TheConsumerman or visit The ConsumerMan website.