ABC Insurance Company plans to sell homeowners insurance in five Western states.ABC expects that 8 homeowners out of every 100,on average,will report claims each year.The variation between the rate of loss that ABC expects to occur and the rate of loss that actually does occur is called

Question

Quizplus · Accepted Answer

The variation between the expected rate of loss and the actual rate of loss is known as objective risk. This is because it is a measurable and quantifiable concept, based on statistical analysis and data. Objective probability refers to the likelihood of an event based on factual information, and is not the same as the variation between expected and actual rates of loss. Subjective probability and subjective risk are related to personal attitudes, beliefs, and feelings about risk, and are not applicable in this scenario.

ABC Insurance Company Plans to Sell Homeowners Insurance in Five