Why Are a Large Number of Exposure Units Generally Required

question 44

Multiple Choice

Why are a large number of exposure units generally required for a risk to be insurable?

• A)It prevents the insurer from losing money
• B)It guarantees that losses will be unintentional and measurable
• C)It enables the insurer to better predict the frequency and severity of losses (moderate)
• D)It minimizes physical hazards

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Definitions:

Unrelated Facts

information or data points that do not have a connection or relevance to each other.

Confirmation Error

What occurs when focusing only on information that confirms a decision already made.

Sunk-Cost Fallacy

The misconception that more resources should be dedicated to something because significant resources have already been spent.

Escalation Of Commitment

The phenomenon where people increase their investment in a decision despite new evidence suggesting it may be wrong.