Question

Why can insurers be more certain about their predictions regarding losses?

a.

Because they charge higher premiums to compensate for losses

b.

Because they exclude high-risk individuals from insurance

c.

Because of the principle of risk avoidance

d.

Because of the "Law of large numbers"

Posted under IC38 Life Insurance Agent Exam

Answer: (d).Because of the "Law of large numbers" Explanation:Insurers can be more certain about their predictions regarding losses because of the "Law of large numbers," which states that larger pools of risks lead to actual averages of losses closer to estimated averages.

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Q. Why can insurers be more certain about their predictions regarding losses?
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