A Tennessee life insurer charges two applicants of the same age, health class, and occupation materially different premiums for identical coverage, and its files show no actuarial reason for the difference. Under T.C.A. § 56-8-104, the insurer has engaged in:

Why B is correct

T.C.A. § 56-8-104 prohibits unfair discrimination, which in the life insurance setting means distinctions between individuals of the same class and equal expectation of life that are not supported by sound actuarial principles. With age, health class, and occupation identical and no actuarial explanation on file, the premium gap is arbitrary. The insurer faces regulatory action by the Tennessee Department of Commerce & Insurance, and the unequal treatment of like risks is the defining feature that separates this practice from lawful underwriting.

Why the other options are wrong

• A) Separate contracts do not authorize arbitrary pricing; individuals of the same class must be treated consistently unless real risk differences justify a difference.
• C) Rebating requires an inducement of value such as a premium refund or favor outside the contract, not merely an unjustified rate difference between two insureds.
• D) Twisting is misrepresentation designed to induce the surrender or lapse of an existing policy; nothing in this scenario involves replacing coverage.

Memory hook

Identical risks, different premiums, no actuarial file to back it up = unfair discrimination.