General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
Which statement about the law of large numbers is FALSE?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
The law of large numbers predicts group aggregates, never individual outcomes. Individual losses remain uncertain and fortuitous — the insurer cannot know which specific insured will file a claim. The law only states that as the number of similar, independent exposures grows, the group's actual losses converge toward the expected value. Statements claiming individual predictability misstate the doctrine entirely, which is why the FALSE-statement answer is the one that asserts individual prediction.
Why the other options are wrong
- B) Predicting aggregate losses of a large group is exactly what the law of large numbers permits — this statement is true.
- C) Homogeneity and large numbers strengthen the statistical estimate, so this accurate statement is not the false one.
- D) Premiums are derived from expected group losses, and the law of large numbers is the basis for that actuarial estimate — this statement is true.
Memory hook
The crowd is predictable; the individual is not. Individual prediction is the false claim.