Health Insurance Mastery Practice Exam

What is it called when an insurer charges higher rates based on an insured's race, religion, or national origin?

1. Unlawful discrimination

2. Risk assessment

3. Premium differentiation

4. Rate adjustment

The correct answer is: Unlawful discrimination

When an insurer charges higher rates based on an insured's race, religion, or national origin, this practice is known as unlawful discrimination. This concept is rooted in the ethical and legal standards that govern insurance practices, aiming to protect consumers from bias and ensure that all individuals are treated fairly regardless of personal characteristics that have no bearing on their risk profile. Insurance companies are typically governed by regulations that prohibit discriminatory practices, ensuring that all consumers have equal access to insurance products without facing higher costs due to factors unrelated to their actual risk. Recognizing unlawful discrimination is fundamental to understanding the principles of fair treatment in the insurance industry and the legal standards that prohibit such behavior. Other terms provided, like risk assessment, premium differentiation, and rate adjustment, pertain to legitimate and lawful methods insurers may use to evaluate and price various risk factors but do not capture the essence of discriminatory practices based on race, religion, or national origin.