There are four basic components of an insurance premium. Which of the following is not one of those components?
A)losses suffered by the members of the insurance pool
B)law of large numbers
C)an allowance for unexpected losses
D)earnings on investments

Question

Quizplus · Accepted Answer

The law of large numbers is not a component of an insurance premium, but rather a statistical principle that helps insurers determine the probability of losses occurring based on the size of the insured pool. The four components of an insurance premium are losses suffered by the members of the insurance pool, an allowance for unexpected losses, earnings on investments, and expenses and overhead costs incurred in operating the insurance business.

There Are Four Basic Components of an Insurance Premium