"Independence" in an insurance pool means:
A) the bad risks pay more for insurance than good risks
B) the members of the pool exhibit the same level of risk
C) those who experience losses have their premiums raised
D) the occurrence of one event makes it neither more nor less probable that the other occurs

Question

Quizplus · Accepted Answer

"Independence" refers to the statistical concept that the occurrence of one event has no impact on the probability of another event occurring. In an insurance pool, independence means that the risks of each member are not influenced by the risks of the other members, and the occurrence of a claim by one member does not increase or decrease the likelihood of claims by other members. Therefore, choice D is the correct answer.

"Independence" in an Insurance Pool Means