General Insurance
What does the law of large numbers allow an insurer to do?
Answer and explanation
Answer: B. The law of large numbers holds that as the number of similar exposures grows, actual results come closer to expected results, which is what makes pricing possible. It does not prevent individual losses, does not flatten premiums across different risks, and does not remove the need for reserves.Source: PSI — New York DFS Insurance Candidate Information Bulletin — Outline, law of large numbers
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