As a litmus test, when the roles are reversed and the insurance company overprices a policy we seem fine with that as a society because even though any individual can have a hugely disproportionate premium the company as a whole has bounded profits (both legally and due to competitive forces). We might even try to argue that an individual can't possibly know their own risk better than a team of actuaries and that they should accept that the premiums are actually correct.
If an insurance company is allowed to knowingly profit 2x, 3x, or more on an individual's premiums based on their best models, why is an individual disallowed from doing the same if only using public information?
If so, where do we draw the line? Is it at a break-even point? What if the insurance company were trying to target an individual for 15% profits; is that person allowed to engage in the contract if they think the company will only earn 3% on average since that would also demonstrate a model better than the company's?
I can definitely see arguments against an individual having any _causal_ effect on the policy (e.g., like burning down a house), but I'm struggling to see why this kind of information arbitrage is inherently wrong.