Final answer:
Group insurance policies are typically issued without requiring proof of insurability, as they involve a mix of individuals with varying health risks, which helps insurers mitigate adverse selection and moral hazard concerns.
Step-by-step explanation:
The type of policy that is typically issued without proof of insurability from the insured is a group insurance policy, often provided through an employer. Group policies mix a diversity of individuals which dilutes the risk for the insurance company and is one method of addressing adverse selection. Adverse selection occurs when an individual knows more about their own health risks than an insurance provider can determine. Because of this imbalance of information, individuals with high health risks might be more inclined to purchase insurance, which is problematic for insurance companies. For example, the Patient Protection and Affordable Care Act in the United States aimed to mitigate this issue by mandating that all Americans have health insurance and prohibiting providers from denying coverage based on preexisting conditions.
The concept of moral hazard is also important in understanding insurance behavior. If people feel protected by insurance, they may engage in riskier behaviors, such as a business installing minimal security features because it has insurance coverage. This is a challenge for insurers as it can increase the frequency and severity of claims.