If two companies have the same number of exposure units and experience the same average number of losses, then the degree of risk for each company tends to be equal.

Question

Quizplus · Accepted Answer

The degree of risk also depends on the variability of losses, not just the average number of losses. Two companies could have the same average number of losses but different variances or distributions of those losses, leading to different degrees of risk.

If Two Companies Have the Same Number of Exposure Units