Final answer:
Home service insurers typically sell Industrial life insurance, designed for small face values. Actuarially fair premiums depend on the specific group risks or an average if individual risk information is unknown. Accurate risk assessment is vital for setting sustainable premiums. Option d
Step-by-step explanation:
The type of life insurance commonly sold by home service insurers is d) Industrial life. This form of insurance is characterized by its small face value, designed to cover burial expenses and other final costs rather than long-term financial planning.
Industrial life insurance policies are typically sold door-to-door, and the premiums are collected weekly or monthly at the policyholder's home. This is a legacy from the times when such insurers literally walked from home to home to collect premiums, providing service to the working-class populations.
Actuarially fair premiums are calculated based on the expected losses for an insurer providing coverage. The risk of each group is assessed separately to determine the correct premium for that group, a) if the insurance company knows the categorization of the groups.
Conversely, b) if categorization is unknown and insurers are covering the entire group without knowledge of family cancer histories, they will calculate a blended or average premium that reflects the combined risk.
In the context of insurance, the premiums must reflect the risk in order to be actuarially fair. An actuarially fair premium is one that is proportionate to the level of risk and the expected cost of claims for the insurance company. Setting these premiums correctly is crucial to both the sustainability of the insurance company and the affordability of the insurance for consumers. Option d