Good point, and in most practical situations its very likely that smokers will be over-represented in applications for life cover. This is because compared to the general population, they are more likely to die and hence have more to gain from the policy (depending on how it is priced).But, seeing as this is for my college-level probability class and it doesn't say that the pool of applicants is in fact the general population,
However for the purpose of a probability class, i think you are expected to assume that 15% of applications are in fact from smokers.
You need a proportion, rather than a number. And im not sure you have calculated your number properly either. The number of people who are actually non smokers is 0.85X, and the number of people claiming to be nonsmokers is 0.85X plus 0.4(0.15X)..85X-(.4(.15X)) = Number of non-smokers polled who are actually non smokers.
Its likely you were taught conditional probability formula before being set this question, try using that.