Final answer:
The only valid reason to increase insurance premiums or deny coverage among the options given is an individual's driving history or motor vehicle record, as it reflects their risk level. Other bases such as ancestry, race, color, religion, sexual orientation, or gender expression are not valid reasons and are typically prohibited by law.
Step-by-step explanation:
The valid reason to deny coverage or charge a higher rate or premium in the context of insurance is based on an individual's driving history or motor vehicle record. Insurers use actuarily fair levels of assessment to determine risk groups and set the appropriate premiums. People with a history of accidents or driving violations are typically considered higher risk and can be charged more because they are statistically more likely to incur costs for the insurance company. Discriminating on the basis of ancestry, race, color, religion, sexual orientation, or gender expression, however, is not considered valid and is often prohibited under anti-discrimination laws.
Adverse selection and moral hazard are two issues that arise from categorizing individuals into risk groups. Insurance companies must balance the need to charge premiums that reflect the risk while avoiding charging so much that high-risk individuals forego insurance altogether. This is essential for maintaining an inclusive and fair insurance market.