The law of large numbers states that as the number of exposure units increases:
A)accuracy of predictions should improve
B)the chance of loss declines
C)objective risk increases
D)the number of perils increases

Question

Quizplus · Accepted Answer

The law of large numbers states that as the number of exposure units increases, the accuracy of predictions should improve. This is because with a larger sample size, the results become more representative of the population, reducing the impact of random variations. This is particularly relevant in insurance, where the larger the number of policyholders, the closer the actual claims experience is likely to be to the expected claims experience.

The Law of Large Numbers States That as the Number