What does "unfair discrimination" refer to in the context of insurance premiums?

In the context of insurance premiums, "unfair discrimination" specifically refers to the practice of charging different rates based on characteristics that should not factor into assessing risk, such as race, gender, or religion. This concept is grounded in the principle of fairness and equity in the insurance industry, which posits that individuals with similar risk profiles should be treated similarly when it comes to pricing for insurance coverage.

Charging different rates based on immutable characteristics like race or gender does not solely reflect the risk presented by a policyholder and can lead to unequal treatment, violating anti-discrimination laws. These regulations aim to ensure that all individuals have equal access to insurance products without facing bias or prejudice in pricing. Therefore, the choice indicating that charging different rates based on these personal characteristics constitutes unfair discrimination accurately encapsulates the essence of this term within insurance law.

Other options do not highlight discrimination in the same way. For example, higher rates for long-term policyholders may reflect their loyalty or the insurer's policy structure rather than discrimination. Similarly, charging premiums based on age and credit score is typically permissible if these factors are relevant to risk assessment and underwriting practices. Applying discounts based on geographic locations may relate to legitimate variations in risk rather than discrimination. Thus, the focus on race,