Indiana State Life and Health Insurance Exam 2025 – 400 Free Practice Questions to Pass the Exam

Unfair discrimination in insurance occurs when individuals in similar circumstances are treated differently based on arbitrary factors that do not impact the risk of loss. In the context of insurance, fairness necessitates that policyholders who fall within the same risk classification be granted similar terms of coverage.

In the scenario where different terms are offered to different policyowners in the same risk classification, there is variance without a justifiable basis. For example, if two individuals have the same health status, occupation, and lifestyle but are provided with different rates or coverage terms based solely on characteristics unrelated to risk—like age or gender—this could be seen as discriminatory. Such practices undermine the principle of equity and fairness that insurance aims to uphold.

In contrast, declining an insurance application due to a hazardous occupation is a reflection of accurately assessing risk. Policymakers assess risks based on clearly defined criteria, and hazardous occupations generally present a greater likelihood of claims. Offering the same terms of coverage to different policyowners in the same risk classification ensures uniformity and fairness, aligning with the principle of treating similarly situated individuals the same. Issuing a policy at a substandard rate due to poor health is an application of risk-based pricing, which is a standard practice in the industry that aligns premium rates with the