Final answer:
The group life insurance policy is incontestable, excluding nonpayment of premium, after two years.
Step-by-step explanation:
The question refers to the time period after which a group life insurance policy becomes incontestable, with the exception of nonpayment of the premium. In practice, most group life insurance policies are contestable for a period after their inception, during which the insurance company may dispute or deny a claim on the basis of misrepresentation or fraud in the application process.
The correct answer here, likely based on U.S. industry standards, is two years.
As for the scenario given about dividing 50-year-old men into groups based on family history of cancer and calculating an actuarially fair premium, if an insurance company were to charge a single premium to the entire group rather than adjust for each subgroup's specific risk, it would result in adverse selection. This means that individuals with a higher risk (those with a family history of cancer who have a higher chance of dying within the next year) would be more likely to buy the insurance, while the lower risk individuals would find it less attractive. This could lead to the insurance company paying out more in claims than they collect in premiums, potentially making the insurance unsustainable.