If an insurance company insured 100,000 cars across the state against theft, which of the following would NOT be true?
A) The insurance company would be fairly certain of the number of cars that will be stolen.
B) The insurance company would be pooling risks.
C) The insurance company would know with a fair amount of certainty the expected payoff on the insurance policies.
D) The insurance company must assume that very few cars will be stolen.

Question

Quizplus · Accepted Answer

The insurance company does not need to assume that very few cars will be stolen; rather, it relies on statistical data and probability to estimate the number of thefts and set premiums accordingly.

If an Insurance Company Insured 100,000 Cars Across the State