Why are a large number of exposure units generally required for a risk to be insurable?
A)It prevents the insurer from losing money
B)It guarantees that losses will be unintentional and measurable
C)It enables the insurer to better predict the frequency and severity of losses (moderate)
D)It minimizes physical hazards

Question

Quizplus · Accepted Answer

A large number of exposure units allows the insurer to better predict the frequency and severity of losses, which helps in setting appropriate premiums and managing risks. If the number of exposure units is too small, the losses can be too random and unpredictable, leading to higher risk for the insurer and potential financial losses. Therefore, a large number of exposure units is generally required for a risk to be insurable.

Why Are a Large Number of Exposure Units Generally Required