What constitutes unfair discrimination in insurance?

Unfair discrimination in insurance occurs when individuals who are in the same policy classification are charged different premium rates without justifiable reasons. The concept of policy classification is designed to group similar risks together so that the underwriting and pricing can be based on shared characteristics. When individuals in the same classification are charged differently, it implies that the insurer is treating these clients unfairly, possibly based on arbitrary factors unrelated to their risk factors or insurance profile.

For example, if two individuals have similar histories and risk profiles but one is charged a significantly higher premium without a valid actuarial reason, it indicates a discriminatory practice. This practice can erode trust in the insurance system, as it suggests that some individuals are being penalized without any data-driven justification, undermining equitable treatment in insurance pricing.

In contrast, providing the same rates to all clients aligns with the principle of fairness in risk assessment, and factors like need-based customer service or discounts for good claim history are considered legitimate practices that promote fairness rather than discrimination.