SOFA-CFE · Question #256
The greater the number of exposure units insured during an origin year, the more claims that can be expected.
The correct answer is A. True. Option A is correct because exposure units represent the units of risk being insured (e.g., car-years, house-years, employee-hours), and more exposure directly means more opportunity for losses to occur - this is the foundational principle behind the Law of Large Numbers in…
Question
The greater the number of exposure units insured during an origin year, the more claims that can be expected.
Options
- ATrue
- BFalse
How the community answered
(43 responses)- A74% (32)
- B26% (11)
Explanation
Option A is correct because exposure units represent the units of risk being insured (e.g., car-years, house-years, employee-hours), and more exposure directly means more opportunity for losses to occur - this is the foundational principle behind the Law of Large Numbers in insurance. As the volume of insured units grows, the expected claim count rises proportionally, since each unit carries some probability of generating a claim. Option B is wrong because it contradicts this basic actuarial relationship; a larger insured population cannot somehow reduce or hold constant the number of expected claims.
Memory tip: Think of exposure units like lottery tickets - the more tickets sold, the more winners you expect. More insured units = more chances for claims to happen.
Community Discussion
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