Ciig Insurance Practice Test & Exam Prep | Ghana

Under risk theory, why is a homogeneous group of risks essential for the operation of insurance?

It guarantees that no losses will occur within the group during the policy period It enables the insurer to predict future loss trends accurately using the law of large numbers It eliminates the need for reinsuring any part of the risk portfolio It allows the insurer to charge the exact same premium to every single policyholder in the country

Correct Answer:

It enables the insurer to predict future loss trends accurately using the law of large numbers

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