Life & Health Insurance Practice Exam 2025 - Free Practice Questions and Study Guide

The correct answer is a homogeneous group, which refers to a collection of individuals who share similar characteristics that affect their risk profile in the context of insurance. These characteristics can include age, health status, occupation, lifestyle choices, and other factors that influence the likelihood and severity of claims.

When individuals are gathered into a homogeneous group, it allows insurance companies to evaluate and price risk more accurately. By having a more uniform risk profile, insurers can better predict losses and set premiums that are actuarially sound. This grouping also facilitates the pooling of risk, where the overall risk is shared among the members of the group, leading to more stable and predictable outcomes for the insurer.

In contrast, terms like application pool and exposure unit refer to other aspects of the insurance process but do not specifically denote a grouping of individuals based on shared risk characteristics. A risk pool is more general and can encompass a diverse range of individuals, not necessarily those with similar traits, thereby lacking the focus on uniformity present in a homogeneous group.