Editing Insurance (section)

===Redlining===
{{Main|Redlining}}

[[Redlining]] is the practice of denying insurance coverage in specific geographic areas, supposedly because of a high likelihood of loss, while the alleged motivation is unlawful discrimination. [[Racial profiling]] or [[redlining]] has a long history in the property insurance industry in the United States. From a review of industry underwriting and marketing materials, court documents, and research by government agencies, industry and community groups, and academics, it is clear that race has long affected and continues to affect the policies and practices of the insurance industry.<ref>Gregory D. Squires (2003), "Racial Profiling, Insurance Style: Insurance Redlining and the Uneven Development of Metropolitan Areas", ''Journal of Urban Affairs'' Volume 25 Issue 4 pp. 391–410, November 2003</ref>

In July 2007, the US [[Federal Trade Commission]] (FTC) released a report presenting the results of a study concerning credit-based [[insurance score]]s in automobile insurance. The study found that these scores are effective predictors of risk. It also showed that African-Americans and Hispanics are substantially overrepresented in the lowest credit scores, and substantially underrepresented in the highest, while Caucasians and Asians are more evenly spread across the scores. The credit scores were also found to predict risk within each of the ethnic groups, leading the FTC to conclude that the scoring models are not solely proxies for redlining. The FTC indicated little data was available to evaluate benefit of insurance scores to consumers.<ref name="FTC Study">[http://ftc.gov/opa/2007/07/facta.shtm Credit-Based Insurance Scores: Impacts on Consumers of Automobile Insurance], Federal Trade Commission (July 2007)</ref> The report was disputed by representatives of the [[Consumer Federation of America]], the National Fair Housing Alliance, the [[National Consumer Law Center]], and the Center for Economic Justice, for relying on data provided by the insurance industry.<ref>[http://www.consumeraffairs.com/news04/2007/07/insurance_credit.html Consumers Dispute FTC Report on Insurance Credit Scoring] www.consumeraffairs.com (July 2007)</ref>

All states have provisions in their rate regulation laws or in their fair trade practice acts that prohibit unfair discrimination, often called redlining, in setting rates and making insurance available.<ref>{{cite web | author = Insurance Information Institute | author-link = Insurance Information Institute | title = Issues Update: Regulation Modernization | url = http://www.iii.org/media/hottopics/insurance/ratereg/ | access-date = 11 November 2008 }}</ref>

In determining premiums and premium rate structures, insurers consider quantifiable factors, including location, [[credit score]]s, [[gender]], [[profession|occupation]], [[marital status]], and [[education]] level. However, the use of such factors is often considered to be unfair or unlawfully [[discrimination|discriminatory]], and the reaction against this practice has in some instances led to political disputes about the ways in which insurers determine premiums and regulatory intervention to limit the factors used.

An insurance underwriter's job is to evaluate a given risk as to the likelihood that a loss will occur. Any factor that causes a greater likelihood of loss should theoretically be charged a higher rate. This basic principle of insurance must be followed if insurance companies are to remain solvent.{{Citation needed|date=February 2009}} Thus, "discrimination" against (i.e., negative differential treatment of) potential insureds in the risk evaluation and premium-setting process is a necessary by-product of the fundamentals of insurance underwriting.{{Citation needed|date=July 2019}} For instance, insurers charge older people significantly higher premiums than they charge younger people for term life insurance. Older people are thus treated differently from younger people (i.e., a distinction is made, discrimination occurs). The rationale for the differential treatment goes to the heart of the risk a life insurer takes: older people are likely to die sooner than young people, so the risk of loss (the insured's death) is greater in any given period of time and therefore the [[risk premium]] must be higher to cover the greater risk.{{Citation needed|date=July 2019}} However, treating insureds differently when there is no actuarially sound reason for doing so is unlawful discrimination.