Final answer:
The statement about Group life plans having a conversion option is true. If an insurance company charges a uniform actuarially fair premium to an entire group without individual risk assessments, it risks financial instability due to adverse selection.
Step-by-step explanation:
The question is regarding Group life plans which are often sold en masse. These plans typically include a conversion option, which allows insured individuals to convert their group life insurance into a personal life insurance policy without providing evidence of insurability. The statement that group life plans sold in mass typically contain a conversion option is True. When individuals choose the conversion option, the new personal life policy will typically have a higher premium. This is because group rates are generally lower due to the pooling of risk among many individuals.
Concerning actuarially fair premiums for group insurance, if an insurance company charges a uniform premium to a diverse group as a whole rather than adjusting for each subgroup's risk characteristics, such as family cancer histories, it risks financial instability. This uniform premium might either be too high or too low for certain subgroups, leading to adverse selection, where only high-risk individuals find the policies financially attractive, potentially resulting in higher claims than expected.