Illinois Casualty Insurance State Practice Exam

Which of the following reasons cannot result in the nonrenewal of an auto policy?

1. Nonpayment of premiums

2. Discrimination against the insured

3. High frequency of claims

4. Change in insurer policy

The correct answer is: Discrimination against the insured

Discrimination against the insured is not a valid reason for the nonrenewal of an auto policy because insurance companies are prohibited by law from engaging in discriminatory practices based on protected characteristics such as race, gender, age, or other personal attributes. Legal frameworks, like the Fair Housing Act and state laws, safeguard individuals from being treated unfairly in insurance matters. In contrast, nonpayment of premiums is a legitimate reason for nonrenewal since insurers must ensure that policyholders maintain their payment obligations to keep their coverage effective. High frequency of claims is also a valid reason, as it poses increased risk to the insurer and can lead to higher premiums and, ultimately, nonrenewal if it exceeds acceptable thresholds. Changes in the insurer's policies may include adjustments in underwriting criteria or business strategies that could impact the decision to renew certain policies. Each of these factors is within the purview of insurers to manage risk and ensure profitability, thereby justifying nonrenewal under those circumstances.