Rates
Stale insurance departments regulate insurance rates to protect consumers from inadequate, excessive, or unfairly discriminatory rates.
Inadequate Rates
Excessive Rates
Unfairly Discriminatory Rates
Insurance rates should reflect the insured‘s loss exposures. Therefore, insureds with similar loss exposures are grouped together in a single rating class and charged the same rate. Although other insureds may be grouped in a different rating class and charged a different rate, that rate must reflect the group's loss exposures.
It would be unfair, however, if the different rate reflected characteristics of the group that had no bearing on their loss exposures. Therefore. rates based on such characteristics would not be permitted because they would be unfairly discriminatory.
What constitutes unfair discrimination varies by state, and some states no longer allow discrimination based on such characteristics as age and sex for certain types of insurance. such as personal auto.