What does the term "unfair discrimination" refer to in insurance practices?

The term "unfair discrimination" in insurance practices refers to treating individuals in similar circumstances differently based on protected characteristics such as race, gender, religion, or other factors that the law identifies as discrimination. This practice is prohibited because it undermines the principle of fairness and equal treatment within the insurance industry. Insurance regulations are designed to ensure that all individuals are treated based on their actual risk factors and not on biases resulting from personal characteristics that do not pertain to their insurability or risk level.

The focus is on equality and fairness in how insurance policies are administered and priced. This means that if two people have the same risk profile but are treated differently due to one of these protected characteristics, it constitutes unfair discrimination. This principle is foundational in promoting fairness and equity in insurance dealings, which regulatory bodies strive to uphold.

In contrast, offering lower premiums to older individuals and providing discounts based on good credit scores can be justified based on legitimate risk factors. Similarly, charging higher rates for high-risk individuals is a practice rooted in actuarial standards and is not considered discriminatory if applied uniformly based on objective criteria. Thus, the key element of "unfair discrimination" lies in inequitable treatment that is unrelated to risk assessment.