Question

How does the cost of risk vary based on probability and severity?

a.

It increases when the probability is high and the severity is low

b.

It is always high regardless of probability and severity

c.

It decreases when the probability is high and the severity is high

d.

It increases in direct proportion with both probability and severity

Posted under IC38 Life Insurance Agent Exam

Answer: (d).It increases in direct proportion with both probability and severity Explanation:The cost of risk increases in direct proportion with both the probability and the severity of loss.

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Q. How does the cost of risk vary based on probability and severity?
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