Under Pennsylvania's unfair trade practices framework and the insurance regulations, what does unfair discrimination in insurance mean?
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Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
Unfair discrimination under 40 P.S. § 1171.5 means making or permitting unfair discrimination between individuals of the same actuarial class in charges, benefits, or policy terms without reasonable actuarial justification. Pennsylvania's market-conduct regulation at 31 Pa. Code § 145.4 reinforces the rule against unjustified distinctions in underwriting and rating. The key distinction is that risk-based differences supported by sound actuarial analysis are lawful; favoritism or arbitrary differences between similarly rated individuals are not, and the Pennsylvania Insurance Department can sanction them under the unfair practices framework.
Why the other options are wrong
- A) Rating by genuine actuarial risk is the lawful foundation of insurance pricing, precisely what Pennsylvania permits and expects.
- B) Targeting marketing by an income threshold may raise suitability or marketing questions, but it is not the differential rate-and-benefit treatment that defines unfair discrimination.
- C) Declining markets it cannot serve is an underwriting and availability matter, not discrimination between individuals of the same actuarial class.
Memory hook
Same class, different price, no reason: that is unfair discrimination in Pennsylvania.