The frequency of loss is the:

The correct answer is A. The number of claims divided by the number of exposures. Frequency of loss is a fundamental insurance metric defined as the number of claims divided by the number of exposures (A), measuring how often losses occur within a given exposure base - for example, 50 claims across 1,000 insured vehicles yields a frequency of 0.05. Why the…

Question

Options

AThe number of claims divided by the number of exposures
BThe number of exposures minus the number of loss
CThe number of coverage extensions divided by the number of exposures
DThe number of claims multiplied by the number of retroactive data

How the community answered

(50 responses)

A
70% (35)
B
10% (5)
C
16% (8)
D
4% (2)

Explanation

Frequency of loss is a fundamental insurance metric defined as the number of claims divided by the number of exposures (A), measuring how often losses occur within a given exposure base - for example, 50 claims across 1,000 insured vehicles yields a frequency of 0.05.

Why the distractors fail:

B is wrong because subtracting losses from exposures has no actuarial meaning - it doesn't produce a rate or ratio.
C confuses frequency of loss with a coverage analysis metric; "coverage extensions" is not part of this formula.
D is nonsensical - multiplying claims by retroactive data produces no recognized actuarial measure.

Memory tip: Think of frequency like any other rate - it's always claims over exposures, just as speed is distance over time. The word "frequency" implies how often per unit, so you're always dividing claims by the exposure base, never subtracting or multiplying.

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