State Farm is the largest insurer of automobiles in the state of Texas. If the company decides to insure 11 million cars in total (that's a whopping 50% of all registered vehicles) across the state against theft, which statement would NOT be true?

Question

Quizplus · Accepted Answer

The statement "The insurance company must assume that very few cars will be stolen" is not true. Just because State Farm insures a large number of cars does not mean that the company can assume that very few cars will be stolen. The number of stolen cars can still be unpredictable and can vary from year to year. Therefore, the insurance company cannot make assumptions about the number of stolen cars and must still pool risks and use actuarial calculations to determine the expected payoff on the insurance policies.

State Farm Is the Largest Insurer of Automobiles in the State