What action can an insurer take when an applicant provides misleading information during the application process?

When an applicant provides misleading information during the application process, adjusting benefits based on the correct information can be an appropriate action for an insurer. This approach recognizes that the insurer has a contractual obligation to honor the policy based on the true circumstances of the applicant. Rather than canceling the policy outright or reporting the applicant's misleading information, the insurer can assess the situation and adjust the benefits accordingly, ensuring that coverage is fair and reflects the actual risk presented by the applicant.

This method also allows the insurer to maintain a more customer-friendly approach, giving the applicant a chance to receive the insurance coverage they intended while also rectifying any discrepancies in the application. By adjusting benefits rather than taking more drastic actions like cancellation or notification to regulatory bodies, the insurer can uphold ethical standards and foster good customer relations.