Question

How can an insurance company ensure that the pool is sufficient to compensate for incurred losses?

a.

By minimizing the number of policies sold

b.

By decreasing the diversity of risks in the pool

c.

By selling more policies to more people

d.

By not predicting any losses

Posted under IC38 Life Insurance Agent Exam

Answer: (c).By selling more policies to more people Explanation:Insurance companies can ensure that the pool is sufficient to compensate for incurred losses by selling more policies to more people, which aligns with the principle of 'the law of large numbers.'

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Q. How can an insurance company ensure that the pool is sufficient to compensate for incurred losses?
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