What does redlining refer to in the insurance industry?

Redlining in the insurance industry refers to the practice of refusing to sell insurance to applicants based on the area in which they reside. This term emerged from the visual representation of neighborhoods on maps, where areas deemed high-risk or undesirable were marked in red. As a result, residents in those redlined areas would find it difficult or impossible to obtain insurance coverage, as insurers would often view these areas as too risky due to socioeconomic factors, crime rates, or historical discrimination. Thus, the practice has significant implications for access to insurance and the equity of insurance markets, impacting the financial stability of those living in marginalized communities.

The other choices do not accurately represent redlining: Offering policies to all applicants describes an inclusive approach rather than exclusion based on location. Providing premium discounts for certain areas involves incentivization rather than discrimination. Insuring properties in high-risk zones suggests an acceptance of risk, contrary to the refusal characteristic of redlining.