Question

What is the principle referred to as 'the law of large numbers' in insurance?

a.

The more policies an insurance company sells, the less predictable the results become.

b.

As the sample size grows, the results come closer to the expected value.

c.

Small sample sizes are more accurate in predicting losses.

d.

Insurance companies need to sell fewer policies to minimize risk.

Posted under IC38 Life Insurance Agent Exam

Answer: (b).As the sample size grows, the results come closer to the expected value. Explanation:The principle known as 'the law of large numbers' states that as the sample size grows, the results become more predictable and closer to the expected value.

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Q. What is the principle referred to as 'the law of large numbers' in insurance?
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