The process of risk selection in the insurance business works the same way

Insurers (in fact, all businesses) make choices where to allot capital. Again, this is much like how an individual chooses to invest personal income. Different insurers also choose the level of overall risk and exposure they are comfortable with, and that is how they choose to allot capital, i.e. invest in their business. If they are willing and able to pay the price the company has established for the higher risk they present, then the company is willing to insure them. There are insurance companies in the United; States, for example, that specialize just in "high risk" drivers, who must pay higher prices than the average-risk driver to get insurance. They believe that it is simply a matter of identifying the appropriate rate for the specific risk presented and whether the person is willing to pay that price.

Some insurance companies believe that virtually all risks are insurable at the right price. This is why insurers are allowed to consider prior driving citations to determine rate and eligibility for coverage; we have proven that the occurrence of the citations affect future loss frequency. However, if we could demonstrate that there is a causal relationship between plaid clothing and loss frequency/severity, we could use it to determine eligibility or pricing for people who wear plaid. That might be viewed as being unfairly discriminatory. For example, we couldn't say we choose not to insure people who wear plaid clothing just because we don't like plaid clothing or because we simply believe that people who wear plaid clothing are poor risks. You need to prove that the price you are charging is fair and based upon fact and that your choices in selecting those risks meet the same criteria. There must be a causal relationship between the existence of a risk's characteristics and the insurer's choice not to insure it or to charge for the trait's existence. Insurance regulation permits companies to discriminate, as long as they do not do so unfairly. Indeed, any process of selection requires us to discriminate, to recognize differences between options and to make choices. The important message here, regarding selecting good risks, is that insurance companies use objective, quantifiable data to select and price risks.