Which of the following illustrates unfair discrimination?

• A. applying a uniform premium to all applicants
• B. charging different premiums for policyholders in the same risk classification
• C. offering discounts for nonsmokers
• D. denying coverage for a medically unqualified risk

Answer: (B)

Unfair discrimination happens when an insurer treats people in the same risk class differently without a valid basis. Rates and terms should reflect actual risk, not arbitrary factors. Charging different premiums for policyholders who share the same risk classification turns on that fairness idea—two people with essentially the same risk shouldn’t pay different prices.

The other options reflect appropriate uses of underwriting and pricing: a uniform premium across applicants is standard and fair; discounts for nonsmokers are a legitimate way to reflect lower risk; denying coverage for a medically unqualified risk is an underwriting decision based on risk, not discrimination based on unrelated characteristics.