Final answer:
A proposed insured who is less likely to experience loss than the average person is known as a preferred risk or low-risk, leading to lower insurance premiums.
Step-by-step explanation:
A proposed insured whose likelihood of loss is significantly less than the average person is classified as preferred risk or low-risk. Insurance companies determine risk categories to set premiums appropriately. However, this process can be controversial due to imperfect information, leading to issues like moral hazard and adverse selection. Adverse selection occurs when those with inherently higher risks seek insurance, posing a strain on the system. Conversely, individuals who are low-risk may end up in a preferred category, enjoying lower premiums due to their lower likelihood of filing a claim.