General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
The law of large numbers makes insurance possible primarily because:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
The law of large numbers holds that the greater the number of similar, independent exposures, the closer actual results come to expected results. Insurers use this statistical certainty to set premiums that will cover anticipated claims and expenses. The law predicts the aggregate, never the individual. Larger, more homogeneous pools produce more reliable pricing, which is why insurers seek broad participation in every line, including health and disability.
Why the other options are wrong
- B) The law predicts outcomes for the group only; any single insured can still suffer a loss at any time.
- C) Individual claims remain unpredictable; only the group aggregate can be estimated reliably.
- D) Underwriting and classification are still essential to keep pools homogeneous so the law works; they are not eliminated.
Memory hook
Bigger pool, sharper pencil. The crowd is predictable even when each face is a surprise.