What describes the process of charging different premiums to policyholders within the same risk classification?

The process of charging different premiums to policyholders within the same risk classification is referred to as unfair discrimination. This means that individuals who are classified into the same risk category are being treated differently regarding the rates they pay for their insurance policies, which is generally not permitted under insurance regulations.

Insurance is based on the principle of risk pooling, where similar risks are grouped together so that costs can be spread fairly among the group. Risk classification, on the other hand, is the method used to categorize policyholders based on statistical risk factors to determine their premium rates. Rate equalization pertains to the idea of standardizing rates or premiums across groups, which stands in contrast to the practice of charging varied premiums within the same classification. Thus, when applying varying premiums to policyholders who are effectively judged by the same risk assessment criteria, it constitutes unfair discrimination, which undermines the fairness and equity principles of insurance.