State RegulationsTX specificDifficulty 3/5
A Texas insurer charges two applicants of the same age, health class and occupation different premiums for the same life policy solely because they live in different counties. Under TIC 544.002, how is this evaluated?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
Under TIC 544.002, unfair discrimination means applying different rates, benefits or terms to insureds of the same class and essentially the same hazard, unless the difference is based on sound actuarial principles, actual experience, or a reasonable classification. Related prohibitions appear in TIC 1702.103 and TIC 1702.153. Geography can be a valid rating factor, but only with actuarial support; a purely arbitrary distinction is unfair discrimination whether or not the rate was filed and whether or not anyone complains.
Why the other options are wrong
- A) Geographic rating is permitted only where it rests on sound actuarial principles, not automatically.
- C) Unfair discrimination is judged by the rate structure itself, not by whether a complaint was filed before delivery.
- D) Filing a rate with TDI does not authorize distinctions that lack actuarial or experience support.
Memory hook
Same class, same hazard, different price — that is unfair discrimination unless the data backs it up.