Insuring common risks in high volume leads to less accuracy in predicting losses, and these vanish because they have been aggregated by the insurer.

Question

Quizplus · Accepted Answer

Insuring common risks in high volume actually leads to more accuracy in predicting losses because it allows insurers to use the law of large numbers, which states that the larger the group of units insured, the more predictable the losses become.

Insuring Common Risks in High Volume Leads to Less Accuracy