What is an example of unfair discrimination in insurance?

Unfair discrimination in insurance refers to treating individuals or groups differently in a way that is not based on a legitimate actuarial basis. The practice of offering different terms for the same risk classification is a clear example of unfair discrimination. This is because it implies that two individuals who fall into the same risk category, based on sound underwriting criteria, are being treated differently for reasons that do not pertain to risk. Insurance should be based on equitable and justifiable factors related to the insured risk; hence offering different terms under similar circumstances to clients with the same risk profile constitutes unfair treatment.

In contrast, offering the same terms for all policy owners promotes fairness and equity within the system. Providing different terms based on age can be justifiable because age often correlates with risk factors, such as experience or health. Similarly, offering lower premiums to long-time clients is a common practice in insurance and can be seen as an incentive for customer loyalty, which is generally regarded as a fair and acceptable business practice.