Final answer:
The feature not characteristic of group life insurance is individual policies. Group life insurance is typically characterized by certificates of insurance, conversion privileges, and a master policy. Actuarial fairness involves setting premiums based on risk, and not having specific data can impact premium calculations.
Step-by-step explanation:
The correct answer to the question of which one is not considered a characteristic of group life insurance is C) individual policies. Group life insurance typically involves:
- Certificates of insurance given to each member participating in the group plan, evidencing their coverage under the group policy.
- Conversion privilege that allows individuals to convert their group coverage into individual coverage if they leave the group.
- Master policy which is the actual insurance contract purchased by the policyholder (usually an employer or organization) covering all group members.
Individual policies, on the other hand, are separate contracts between the insurance company and each individual policyholder and are not part of a group plan.
In the context of actuarial fairness, this concept implies that premiums should be set in a way that reflects the true cost of the risk covered. If the insurance company were selling life insurance separately to each group, the actuarially fair premium would be calculated based on the specific risk factors and claims history pertinent to each group. Conversely, if the insurance cannot discriminate based on family cancer histories, for example, they would have to set a single premium reflecting the average risk of the entire group, which may lead to adverse selection where higher-risk individuals preferentially choose to apply for insurance, potentially leading to financial instability for the insurer.