When two individuals in the same risk class are charged different rates due to their financial positions, what practice does this represent?

The practice of charging different rates to individuals in the same risk class based on their financial positions illustrates discrimination within the context of insurance pricing. In insurance, individuals who present similar risk profiles should, in theory, be charged similar premiums. When one individual's financial situation affects their rate despite their risk class being identical to that of another person, it indicates that a subjective factor (financial position) is influencing the pricing.

This approach does not align with the principles of fairness and equality in underwriting and policy pricing, where rates are meant to reflect risk rather than personal circumstances unrelated to risk. It deviates from standard risk assessment practices, which should remain consistent across individuals with similar risk factors. Discrimination in this context pertains specifically to the inconsistency in treatment of similarly assessed individuals based solely on financial differences, which can lead to legal and ethical issues within the insurance industry.