Why is a large number of exposure units generally required before a pure risk is insurable?
A)It prevents the insurer from losing money.
B)It eliminates intentional losses.
C)It minimizes moral hazard.
D)It enables the insurer to predict losses more accurately.

Question

Quizplus · Accepted Answer

A large number of exposure units is required before a pure risk is insurable because it enables the insurer to predict losses more accurately. With a larger pool of exposure units, the insurer can better predict the probability and severity of losses, which helps them to price policies accurately and avoid losses. Without a sufficient number of exposure units, the insurer may not be able to accurately predict and price the risk, leading to potential losses for the insurer.

Why Is a Large Number of Exposure Units Generally Required