What does unfair discrimination refer to in insurance?

Unfair discrimination in insurance refers to the practice of applying different standards or criteria to individuals who present similar risks. This means that two insured individuals or groups who are statistically similar in terms of risk could end up having different premiums or coverage based on factors unrelated to their actual risk profiles. Such practices can result in inequities and are typically regulated by insurance laws to protect consumers and ensure fairness in underwriting decisions.

For instance, if two applicants are both young, healthy individuals wishing to purchase the same health insurance policy, but one is charged a significantly higher premium due to non-risk-related factors such as their geographical location or demographic category, that could qualify as unfair discrimination. Insurance regulators aim to promote a fair system by ensuring that all applicants are treated equitably based on relevant risk factors. This is crucial for maintaining public trust in the insurance system and ensuring compliance with consumer protection laws.