Step 1: Break the stem into clues. The key words are preoccupation with a serious illness and normal body function, meaning the body works fine but the mind is fixed on a dreaded disease.
Step 2: Match this to the somatoform disorders. Hypochondriasis is the condition where a person, after misreading ordinary bodily sensations, becomes convinced or terrified that they harbour a grave illness and keeps seeking consultations even when every test is normal.
Step 3: Separate it from the look-alikes. Somatization centres on a long list of bodily symptoms rather than one named disease; conversion disorder shows neurological deficits like paralysis or blindness without a physical lesion; an obsession is an unwanted repetitive thought characteristic of OCD.
Step 4: The presence of insight plus the focus on the illness label rather than the symptom count seals the diagnosis as hypochondriasis.
\[\boxed{\text{Hypochondriasis}}\]