California Life-Only & Accident and Health AgentCalifornia Law - GeneralHard
An insurance agent is found to have engaged in 'redlining.' Which of the following best describes this discriminatory practice?
- AOffering special discounts to preferred customers based on their driving record.
- BCharging different premiums to individuals solely based on their gender.
- CRefusing to issue policies to individuals based on their marital status.
- DDenying or limiting coverage to residents of specific geographic areas without sound actuarial basis.
Show answer & explanationAnswer & explanation
Correct answer: D. Denying or limiting coverage to residents of specific geographic areas without sound actuarial basis.
Redlining is the illegal practice of denying or limiting insurance coverage, or charging higher premiums, to residents of specific geographic areas based on factors other than a sound actuarial basis, often due to the racial or ethnic composition of the area. This is a prohibited unfair practice.
Why the other options are wrong
- A. Using driving records for discounts is a legitimate underwriting practice, not redlining.
- B. Charging different premiums based on gender alone is often prohibited, but it's not 'redlining'.
- C. Discrimination based on marital status is generally illegal but not specifically 'redlining'.
Redlining (Insurance)
An illegal discriminatory practice where insurers or agents deny or limit coverage based on the geographic location of the applicant, often without a sound actuarial basis.
- Discriminatory practice prohibited by law.
- Targets specific geographic areas (e.g., zip codes).
- Often based on socio-economic or racial factors, not risk.
- Violates fair underwriting principles.
Memory trick: Redlining: Don't Draw Lines, Insure All Kinds.