Insurers use the law of large numbers to predict how many future losses will occur for a group. The basic principle of this law is:

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The basic principle of this law is the larger the number of people in the group, the more predictable the loss. The law of large numbers uses statistics to evaluate and accurately predict the outcomes of certain events. These predictions are then used to provide the insurer a means of understanding how much and how often losses might occur.

Insurers Use the Law of Large Numbers to Predict How