State RegulationsTN specificDifficulty 1/5
Under Tennessee insurance law, an insurer commits unfair discrimination when it:
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
The unfair discrimination practice prohibited under T.C.A. § 56-8-104 is the making of distinctions between individuals of the same class and essentially the same risk that have no actuarial basis. Tennessee law does not require insurers to ignore genuine risk differences; rate distinctions that fairly reflect differences in hazard are lawful underwriting. What is barred is treating like risks unequally, because that shifts costs arbitrarily and is enforced by the Tennessee Department of Commerce & Insurance.
Why the other options are wrong
- A) Distinguishing tobacco users from nonsmokers rests on documented differences in claims experience, which is actuarially justified risk classification, not discrimination.
- B) Declining risks that fail published standards is ordinary underwriting; unfair discrimination concerns unequal treatment of similar risks, not declines for dissimilar ones.
- D) Offering different policy forms to everyone on the same terms is product design, not a distinction between similarly situated individuals.
Memory hook
Same class, same risk, different treatment, no actuarial reason = unfair discrimination.