An insurer charges two applicants with identical risk characteristics materially different premium rates, with no actuarial justification. Under New Jersey trade practice standards, which practice is this?

Why A is correct

Unfair discrimination means making or permitting unfair rate distinctions — charging materially different rates to insureds in the same risk class without actuarial justification. New Jersey's trade practice standards, enforced by the New Jersey Department of Banking and Insurance, require that rate differences reflect genuine actuarial differences in risk, not arbitrary or invidious distinctions between policyholders. The insurer's filed rates must be applied consistently to similarly situated applicants.

Why the other options are wrong

• B) Rebating is a producer's giveaway of value to induce a sale; the scenario involves the insurer's rates, not a producer's inducement.
• C) Twisting involves misrepresenting a policy to induce its replacement; no replacement is described.
• D) A boycott involves concerted action to exclude or pressure another market participant; the scenario concerns the insurer's own pricing.

Memory hook

Same risk, different price, no reason = unfair discrimination.