General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 3/5
An actuary tells a new agent, 'For a large group, the risk is predictable even though each individual's outcome is uncertain.' This statement is:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Insurance rests on a paradox: individual outcomes are random and unknowable, but the aggregate outcome of a large group of similar exposures becomes statistically predictable. The law of large numbers lets actuaries estimate how many claims the group will produce and price premiums accordingly. This group predictability with individual uncertainty is precisely what makes insurance feasible, including for health and disability coverage.
Why the other options are wrong
- B) Individual outcomes are never predictable — that is the fortuitous element; only the group aggregate can be predicted reliably.
- C) The law of large numbers applies across all insurance lines, including health, disability, and life, not just property coverage.
- D) Risk is measurable; actuaries measure it continuously through mortality, morbidity, and claims data.
Memory hook
The crowd is a crystal ball; the individual is a coin flip. Predict the group, price the pool.