How Unfair Discrimination Can Affect Your Premiums – Business Insider

Insurance companies use a process called underwriting to determine your risk level. If you’re considered a high-risk consumer, your insurance premiums will most likely be more expensive. Insurance companies, however, cannot use race, religion, sex, or national origin to charge you higher premiums or deny coverage. To do so would be considered unlawful discrimination.
While unfair discrimination is illegal in all US states, people of color and history underrepresented groups are still disproportionately affected by discriminatory practices in insurance. 
Insurers use risk to determine how much to charge an individual and whether an individual qualifies for coverage. An insurance company may use two types of discrimination: disparate impact and unfair discrimination. The first is legal. The second type is not.
Unfair discrimination occurs when factors such as race, national origin, and religion are metrics used in the insurance underwriting process. Unfair discrimination is ” a consumer is not treated fairly and equitably through the process of purchasing a product, through the claims process, or simply being offered products that are of the same value and quality as others,” 
Chlora Lindley-Myers, Director of Missouri Department of Commerce and Insurance, and co-chair of the special (EX) committee on race and insurance at the National Association of Insurance Commissioners. Unfair discrimination is illegal in every US state.
Disparate impact is a method of proving discrimination when there is no overt discrimination against members of a protected class, according to Susan Stead from Squire Patton Boggs, and a member of the board at the Federation of Regulatory Counsel (FORC) a non-profit insurance regulation agency. Disparate impact is a legal method of determining a consumer’s risk. An example of disparate impact is insurers giving you higher rates or denying coverage based on traffic violations and frequent claim history.
Discrimination against age, gender, and where you live also falls under disparate impact, meaning insurers can raise premiums or deny coverage based on those characteristics. Nonetheless, this is still a grey area in insurance law. 
Lindley-Myers cites three practices that lend way to unfair discriminatory practices.
Insurance regulation agencies like the NAIC are stepping up to protect consumer interests. In 2020, the NAIC formed the special (EX) committee on race and insurance to promote anti-discrimination practices and policies in the insurance industry. 
Lindley-Myers says that the NAIC race and insurance committee is taking action to reduce unfair discrimination in four key ways: 
You could be paying more than you should for insurance because unfair discrimination. Here are some steps to reduce your premiums or contest discrimination if you experience it. 
Quick tip: Your state insurance department can also look up the reputation of an insurance agent or company. You can check to iff a company had legal action taken against them.
Unfair discrimination in insurance is prohibited federally. As frustrating as it might be to experience, insurance is still crucial and, in some cases, mandated by law. 
While groups like the NAIC work to combat these issues, you can still take action like shopping around and seeking discount opportunities. More importantly, it is crucial to know the resources at your disposal if you are a victim of unfair treatment, like your state’s insurance department.


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