General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
When an insurer evaluates a loss exposure for pricing, frequency and severity refer to:
Select an option to reveal the answer and the full 3-part explanation — free, no signup.
Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Frequency is the expected number of times a loss occurs in a period; severity is the expected dollar size of each loss. Together they describe the loss exposure: a peril that occurs rarely but costs a great deal (major surgery) and one that occurs often but costs little (routine office visits) produce different pricing and benefit designs. The two dimensions frame underwriting and rate making.
Why the other options are wrong
- B) This reverses the definitions: frequency is 'how often' and severity is 'how big.'
- C) Frequency and severity describe loss outcomes, not counts of perils and hazards.
- D) Age and benefit amount are policy and rating factors, not the frequency-severity dimensions.
Memory hook
Frequency = count. Severity = cost. Every exposure is a count x cost story.