What practice is involved when one twin is charged a higher life insurance rate due to a better financial position than the other?

Discrimination in the context of life insurance refers to the practice of charging different rates based on certain characteristics or factors, which is what happens when one twin faces a higher insurance rate based on their financial position. In this scenario, the insurance company assesses the financial stability and risk profile of each twin separately, leading to varying rates that reflect their individual situations.

While the term can carry negative connotations, it can also describe legitimate underwriting practices in which insurers adjust rates based on specific criteria. The principle behind this practice is to align the premium with the risk that each individual presents to the insurer. In the case of the twins, their differing financial circumstances are legitimate reasons for the variance in their insurance rates.

Understanding this concept is crucial, as it highlights the importance of risk assessment in the insurance industry, where insurers must ensure that their pricing reflects the expected cost of claims associated with any individual policyholder.