Two life insurance applicants present identical risk factors — the same age, build, occupation, and health history — but they differ in religion. An insurer charges the second applicant a higher rate because of that religious difference. Under 40 P.S. § 477a, this practice is:

Why B is correct

40 P.S. § 477a makes it unfair discrimination to differentiate between individuals of the same insurance class by rates or treatment based on factors that do not bear on the risk, such as religion. Because these two applicants are actuarially identical, the rate differential has no underwriting justification and violates the statute regardless of disclosure or complaint procedures. The Pennsylvania Insurance Department enforces the prohibition, which protects the fairness of the classification system itself.

Why the other options are wrong

• A) Market tolerance is not the test; 40 P.S. § 477a forbids rate distinctions that lack a risk-related basis.
• C) Disclosure cannot cure discrimination; a bias-based rate difference is unlawful whether or not the applicant is told of it.
• D) The prohibition operates directly against the discriminatory rate; no internal complaint is a precondition to its violation.

Memory hook

Same risk, same rate — religion is never an underwriting factor.