Which of the Following Statements Is INCORRECT About the Risks

question 6

Multiple Choice

Which of the following statements is INCORRECT about the risks that an insurer faces?

• A) Insurance businesses have been successful through the centuries because insurers are skillful in finding natural hedges.
• B) Insurance companies employ actuaries who calculate the likelihood of loss events and fair premiums for insuring risks.
• C) Actuaries cannot foretell whether any particular insured entity will suffer a loss,but they can estimate with reasonable accuracy the expected losses in a large population.
• D) Insurers try to manage risks by diversifying their losses across a large number of policyholders with the hope that the law of large numbers holds.
• E) Insurance companies often hedge their losses on catastrophic events by purchasing reinsurance.

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Definitions:

Chi-square Test

A statistical test used to determine if there's a significant difference between the expected frequencies and the observed frequencies in one or more categories.

Economic Concerns

Issues or problems relating to the economy, including unemployment, inflation, and economic policy.

Proportion

A fraction or percentage that represents a part of a whole or a total.

Test

An examination or evaluation conducted to determine the presence, quality, or truth of a specific characteristic, hypothesis, or condition.