Final answer:
A person insured under a group life insurance policy cannot assign the right of conversion. They can designate beneficiaries and affect the distribution of policy proceeds. Insurance companies that cannot assess individual risks must use actuarially fair premiums, risking adverse selection and potential financial loss.
Step-by-step explanation:
A person insured under a group life insurance policy may make an assignment of many rights within their policy, except for the right of conversion. Specifically, the insured individual can designate beneficiaries and direct the distribution of policy proceeds, but they do not have the flexibility to convert group coverage into individual coverage—that provision would fall under the terms and conditions of the insurance contract and is usually controlled by the policyholder, often an employer, rather than the individual insured.
When considering how an insurance company would price premiums, if it can't discern individual health risks such as family cancer histories, the company would determine an actuarially fair premium based on the average risk of the entire group. If the insurance company charges this fair premium for the group as a whole instead of pricing for each subgroup separately, it risks experiencing adverse selection, where individuals with higher risk are more likely to buy insurance, potentially leading to financial loss for the company.