Arizona Surplus Lines Practice Exam 2025 – Complete Study Resource

The term that accurately describes the unfair practice of treating individuals differently in insurance based on certain characteristics is "Unfair Discrimination." This term is used in insurance regulation to denote practices that unjustly impact individuals or groups, making distinctions based on factors that are not relevant to their insurance needs or risk.

In the insurance context, unfair discrimination can manifest when an insurer uses factors such as race, gender, religion, or other non-risk-related characteristics to determine premiums or coverage eligibility. Such practices are generally prohibited by law and are seen as unethical because they do not reflect the true risk that an individual may present to the insurer.

While "Discriminatory Practices" may seem similar, it lacks the specificity implied by "Unfair Discrimination," which is a defined term in insurance regulations. "Insurance Bias" is a less formal term and does not carry the same regulatory weight as "Unfair Discrimination." "Risk Profiling," on the other hand, refers to the process of evaluating an individual’s risk based on objective criteria and is a legitimate practice in underwriting when done fairly. Thus, "Unfair Discrimination" best captures the essence of treating individuals inequitably in the insurance industry.