In the context of life assurance, what does 'morbidity rate' refer to?

The term 'morbidity rate' in the context of life assurance specifically refers to the expected proportion of lives developing a serious illness. This measure is crucial for insurance companies as it helps them assess the risk associated with insuring individuals against health-related issues and the potential costs involved in claims. Understanding morbidity rates allows insurers to better price their policies and plan for future payouts while also managing their overall risk exposure.

In life assurance, morbidity rates are significant for determining coverage options and the financial implications of various health conditions on the insured population. This helps in creating a more accurate underwriting process, aligning premiums with the risk profiles of policyholders who may face serious health challenges. Hence, option B accurately captures this definition and significance in the life assurance context.