Final answer:
The incorrect statement about an insured who is considered to be a standard risk is that they pose a higher risk of loss; whereas, standard risk individuals have average life expectancy, pay standard premiums, and meet the insurer's underwriting criteria.
Step-by-step explanation:
Which is NOT true regarding an insured who is considered to be a standard risk? The answer is b) They pose a higher risk of loss. Individuals categorized as standard risk have an average life expectancy, pay standard premiums, and meet the insurer's underwriting criteria. These insureds do not pose a higher risk of loss compared to others; instead, they represent the baseline or average level of risk that an insurance company expects.
Insurance companies classify risks to ensure the fundamental law of insurance is upheld, which states that the average person's payments into insurance over time must cover the average person's claims, the costs of running the company, and allow for the firm's profits. To maintain actuarial fairness, insurance companies must accurately assess the risk of loss and set premiums accordingly.