Final answer:
Insurance underwriters are responsible for calculating risks, deciding on policy offerings, and setting premiums, not marketing. Charging an actuarially fair premium to the entire group as opposed to individual risk groups could lead to losses for the insurer.
Step-by-step explanation:
Underwriters for an insurance company do not market insurance policies. Their role involves calculating the risks of specific policies, deciding on which insurance policies to offer, and determining what premiums to charge based on these risks. This process aims to avoid adverse selection and ensure that the company can remain profitable while providing the necessary coverage to its clientele.
When insurance companies charge the actuarially fair premium to a group as a whole rather than to each group separately, they risk mispricing the insurance for different risk levels, potentially leading to a loss. This is why underwriters focus on risk assessment and pricing strategies that account for various risk factors. Government interventions, such as requiring everyone to buy certain types of insurance, can impact these practices by mandating a market-wide average price, which sometimes leads to lower-risk individuals subsidizing the higher-risk ones.