Question

Why is it important for sub-classes to be as homogeneous as possible?

a.

To increase statistical variances

b.

To make premium setting easier for underwriters

c.

To ensure reliability of the data

d.

To decrease the law of large numbers

Posted under IC 14 Regulations of Insurance Business

Answer: (c).To ensure reliability of the data Explanation:Sub-classes should be as homogeneous as possible to ensure the reliability of the data. Homogeneous sub-classes allow for more accurate analysis and estimation of reserves because they contain similar types of risks or claims experiences, making comparisons and predictions more meaningful and reliable.

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Q. Why is it important for sub-classes to be as homogeneous as possible?
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