Final answer:
An applicant for accident and health insurance with a common risk factor will likely be categorized in a standard risk group, with insurance premiums reflecting the shared risk level of the majority of the insurer's applicants.
Step-by-step explanation:
The likely outcome for an applicant for accident and health insurance who has a risk factor similar to that of the majority of the insurer's other applicants is that the applicant would be categorized within a standard or average risk group. This means that their insurance premiums would be aligned with the premiums of the majority, reflecting the shared level of risk.
Since the risk is not significantly higher or lower than that of the average policyholder, the insurance company would base the individual's premiums on the actuarial calculations used for the majority of its applicants. Companies use historical data and statistics to estimate the likelihood of future claims, spreading the cost of potential claims across all members of a risk group.
If the applicant had characteristics of an adverse selection, where they are likely to make more claims than the average due to their known risk factors, or show signs of moral hazard, where the individual's behavior post-insurance purchase could lead to higher risks, then the insurance company might adjust premiums accordingly. It's possible, however, that if the risk factor is a common one, this adjustment might already be incorporated into the standard premiums. Thus, being part of a common risk group typically results in standard treatment by the insurer.