Unfair Discrimination
Unfair differences in rates, benefits, or terms between people of the same class and essentially the same risk, plus listed cases such as race-based refusals.
The definition draws on Section 4H of the NAIC’s Unfair Trade Practices Act (#880), a model act that a state may enact and adapt. Items (1) and (2) compare people in the same class. In life insurance and annuities, they must have an equal expectation of life. In accident and health insurance, they must present essentially the same hazard. Both items reach rates, benefits, and other terms, and neither needs a trait such as race to apply. On our reading, charging different risks different prices falls outside these items. A drafting note says to omit the health item where a state’s other statutes treat the subject.
Protected traits appear among the situations that items (3) to (8) add. Item (5), for one, lists refusing or limiting coverage because of sex, marital status, race, religion, or national origin, with carve-outs for marital status in dependent benefits and for fraternal benefit societies.
The model act sets no testing duty. New York’s Circular Letter No. 7 says insurers licensed there should first check external consumer data and AI systems used in underwriting or pricing for disproportionate adverse effects on similarly situated insureds or on a protected class. Our disparate impact entry covers effects on a protected class, and our testing guide explains how to run and document the letter’s tests.