Kwak’s parenthetical about how insurers can’t examine applications before they’re approved on the grounds that that would be “impractically expensive” misses the true evil here: the insurer wants to cash the insurance-premium checks of people who made fraudulent applications. Those are the most valuable insureds of all, because the minute they make claims which cost more than their premiums, their policies can be immediately rescinded. As Taunter puts it, you are free to play, you just aren’t free to win. And that’s why you get people being denied breast-cancer surgery on the basis of having had acne in the past.
Felix Salmon on Conditional probabilities and evil insurers, the rest here.