Final answer:
The statement is false because insurers primarily consider actuarial fairness and risk groups before accepting loss exposures. Charging a uniform premium to all instead of differentiating by risk groups can lead to financial imbalances and adverse selection.
Step-by-step explanation:
The statement is false. The concepts of mass and similarity are not specifically considered before an insurer accepts a loss exposure; rather, actuarial fairness and the classification into risk groups are major considerations.
When an insurance company charges the actuarially fair premium to the group as a whole rather than to each risk group separately, it risks some groups being overcharged and others being undercharged. This may lead to adverse selection, where higher-risk individuals are attracted by the lower-than-appropriate premiums, and lower-risk individuals may leave for better-priced options, potentially resulting in financial instability for the insurer.
Thus, the fundamental law of insurance dictates that the average person's payments into insurance over time must cover the average person's claims, the costs of running the company, and provide room for the firm's profits. Risk groups allow insurers to adjust premiums based on the likelihood of an adverse event occurring. Erroneous classification or inadequate risk assessment can complicate this balance and lead to moral hazard and adverse selection, which are major challenges in the insurance market.