What is an example of unfair discrimination in insurance?

Unfair discrimination in insurance occurs when insurers treat individuals or groups differently in a way that is unjust, particularly in how they assess risks and determine premiums or coverage terms. The correct answer illustrates this concept well. Offering different terms for identical risk classifications means that two individuals or groups, who statistically represent the same risk, are given different rates or coverage. This is discriminatory because it does not have a legitimate basis in the risk presented but rather is based on arbitrary factors, which can lead to unequal treatment in the insurance market.

The reason this practice is classified as unfair discrimination is that it undermines the principles of fairness and equality that the insurance system is intended to uphold. If two people are assessed as having the same risk profile, they should ideally be given the same treatment regarding their policy terms and premiums. This kind of inconsistent application can lead to broader negative impacts on consumers and can cause distrust in the insurance industry.

The other options represent practices that are either standard or permissible in the insurance industry. Offering policy discounts is a common practice aimed at incentivizing safe behavior or rewarding loyal customers. Applying the same terms for all applicants is a fair practice that promotes equity. Providing comprehensive coverage options ensures that consumers have access to a range of insurance products that suit their needs.