Final answer:
A Group insurance plan is a good choice for individuals with health issues, as it usually offers better coverage and affordability. Life insurance premiums are based on risk factors such as family cancer history, and actuarially fair premiums vary accordingly. Without this information, insurers must average out premiums, which can lead to adverse selection.
Step-by-step explanation:
For individuals with health issues who are considering an insurance plan, a suitable option is the Group insurance plan. Group insurance policies often provide coverage to members of a group at a reduced cost because the risk is spread across all the insured individuals. Coverage may be more comprehensive and premiums more affordable than individual plans, especially for those with pre-existing health conditions.
When considering life insurance and the question of actuarially fair premiums, these would vary depending on the group's risk factors. For example, if an insurance company were selling life insurance separately to groups based on family cancer history, the premiums would reflect the varying risk. Those with a family history of cancer would generally pay a higher premium due to the increased likelihood of a claim.
If the company is offering life insurance to the entire group without knowing their family cancer histories, it would need to calculate an average premium that balances the risk across the entire group. This calculation would be more complex and could lead to adverse selection if the premium is not adequately adjusted for the combined risk.