Under group underwriting, which statement correctly describes how costs are determined?

Under group underwriting, which statement correctly describes how costs are determined?

• A. The individual health status of each member determines the cost.
• B. The date the policy was issued determines the cost.
• C. The type, size, average age, location(s), and group's claim history determine the cost.
• D. The insurer's marketing budget determines the cost.

Answer: (C)

In group underwriting, costs are set based on characteristics of the group as a whole, not on any one member. The premium is determined by factors that describe the group—what type of group it is, how many members it has, the group's average age, where members live, and the group's past claims history. These elements help the insurer estimate the overall risk of the pool and price the coverage accordingly, spreading risk across all members. Individual health status isn’t used to price group plans because that would undermine the pooling of risk. The policy’s issue date doesn’t affect future costs, and the insurer’s marketing budget isn’t a factor in premium calculations.

In group underwriting, costs are set based on characteristics of the group as a whole, not on any one member. The premium is determined by factors that describe the group—what type of group it is, how many members it has, the group's average age, where members live, and the group's past claims history. These elements help the insurer estimate the overall risk of the pool and price the coverage accordingly, spreading risk across all members. Individual health status isn’t used to price group plans because that would undermine the pooling of risk. The policy’s issue date doesn’t affect future costs, and the insurer’s marketing budget isn’t a factor in premium calculations.