Final answer:
The policyowner controls changes in premium payments, face value, loans, and policy plans for an insurance policy. Charging an actuarially fair premium to the entire group rather than individuals could lead to financial imbalance for the insurance company due to adverse selection. Option D is correct.
Step-by-step explanation:
The entity that controls changes in premium payments, face value, loans, and policy plans is the policyowner. The policyowner has the rights to alter the insurance policy within the terms of the contract. This includes changing the amount and frequency of premium payments, selecting or changing the beneficiaries, borrowing against the value of the policy if it has a cash value component, and altering or updating the policy plan as allowed by the insurance contract.
An actuarially fair premium is one that is statistically calculated to be equivalent to the expected payout for an insurance policy. Individual premiums can differ based on risk factors such as family health history. If an insurance company charged an actuarially fair premium to the entire group without individual differentiation, it could lead to losses or gains, depending on whether the group as a whole had lower or higher risk than predicted. Charging group rates disregards individual risk and could lead to adverse selection where higher risk individuals are more likely to purchase insurance, potentially leading the insurance company to financial strain.