HS 311 Practice Questions - HS 311 Fundamentals Of Insurance Planning Exam

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The law of large numbers is fundamental to insurance pricing. What does it state about the relationship between exposure units and predictability?

As the number of similar exposure units increases, actual loss experience more closely approaches expected loss experience As premiums rise, the number of claims falls proportionately As deductibles increase, the insurer's expected losses increase As the number of insureds decreases, predictability improves

Correct Answer:

As the number of similar exposure units increases, actual loss experience more closely approaches expected loss experience

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