State RegulationsNY specificDifficulty 2/5
An underwriter reviews applications from applicants of the same age and health status. Which premium distinction between them is lawful under the New York Insurance Law's unfair-discrimination provisions?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
Under N.Y. Ins. Law §§2606 through 2608, rate distinctions are fair when they reflect genuine differences in hazard between insureds. Charging a smoker more than a similarly situated nonsmoker is a classic risk-based distinction, because tobacco use has a demonstrable effect on mortality and morbidity.
Why the other options are wrong
- A) The identity of the submitting agent has no bearing on the risk and cannot support a rate difference.
- B) Personal likes and dislikes are the essence of arbitrary classification — precisely what the unfair-discrimination provisions forbid.
- D) Loyalty or tenure as a policyholder is unrelated to the hazard insured and cannot justify a higher rate within the same class.
Memory hook
Risk may set the price; relationships may not.