What is considered illegal discrimination by an insurer in terms of rate setting?

Discrimination based on age or sex is considered illegal in rate setting by insurers. This is because such practices violate fair treatment principles and regulatory standards that aim to ensure that all individuals are treated equally and without bias. Insurance pricing should be reflective of risk factors that are directly related to insurability, such as driving history, claim history, and the characteristics of the property being insured, rather than personal attributes like age or gender, which do not correlate with risk in a fair and just manner.

In contrast, the other options can include practices that are generally permissible under the law. For instance, charging higher rates based on geographic location is based on statistical risk associated with different areas, which can be justified by underwriting principles. Offering lower rates to preferred clients is a common practice to reward good history or low-risk individuals, and providing discounts for bundled policies encourages customers to consolidate their insurance needs, which can also promote customer loyalty and reduce administrative costs for insurers. However, such strategies must always adhere to the law and consider risk factors appropriately.