When does unfair discrimination occur in the context of insurance?

Unfair discrimination in insurance occurs when individuals or groups that are classified under the same risk category are treated differently in terms of premiums charged or benefits provided. This means that if two policyholders represent a similar risk profile—meaning they share comparable risk factors—they should be offered the same premium rates and benefits. Charging different premiums or offering different benefits to individuals in the same classification undermines the fair underwriting principles and can lead to disparities that are not justified by risk assessment.

Option B highlights this critical concept, indicating that unfair discrimination arises specifically from the inconsistent treatment of policyholders with similar risk characteristics. This practice can be harmful and unlawful, as it violates the principles of equity and fairness expected in insurance underwriting.