Final answer:
An insurer cannot settle a claim using an application altered without the insured's knowledge. While higher premiums can be charged based on risks and insurance ads can be distributed, expanding coverage usually requires a new policy. Strict premium regulations by state insurance regulators can lead insurers to avoid high-risk groups or withdraw from a market.
Step-by-step explanation:
An insurer may not try to settle a claim using an application that was altered without the knowledge of the insured. Ethical and legal standards in the insurance industry require transparency and honesty in the claims process. Altered applications can lead to misinformation and an unfair settlement that could harm the insured party.
While insurers can charge higher premiums to certain demographics based on risk profiles, such as elderly drivers, they must do so within the framework of applicable laws and regulations. Insurance companies are also able to distribute pamphlets or advertisements as a part of their marketing strategies. However, expanding coverage typically requires the insured's consent through a new or revised policy.
State insurance regulators may enact rules to set low premiums, but this can lead insurers to avoid insuring high-risk groups or potentially withdraw from the market if it's not financially viable, as seen with companies withdrawing from New Jersey and State Farm's withdrawal from Florida. In general, insurance premiums should reflect the actuarially fair cost of insuring a particular group to avoid losses and ensure fairness among all insured parties.