Final answer:
The insurer does not consider the applicant's occupation when setting individual health insurance policy premiums. They focus on risk of loss, age, and medical history, aiming for premiums that reflect the individual's risk group, which may affect the affordability for high-risk individuals.
Step-by-step explanation:
When setting premiums for an individual health insurance policy, an insurer does indeed consider various factors such as the applicant's risk of loss, age, and medical history. These are critical in determining the level of risk associated with insuring the individual, and hence, the cost of the premium. However, the applicant's occupation is not typically a factor that health insurers take into account when setting premiums for health insurance policies.
Insurance companies strive to set premiums at an actuarially fair level, meaning that people pay amounts reflecting their risk group. For instance, those with chronic illnesses or the elderly would face higher premiums due to their increased healthcare costs. Conversely, actuarially fair insurance would result in lower premiums for low-risk individuals. Notably, this practice may lead to a lack of affordability for high-risk groups, who might then opt not to purchase insurance at all, resulting in adverse selection.