Q:
# What is the law of large numbers in insurance theory?

**The Law of Large Numbers in insurance theory is based on the idea that larger numbers of policies written result in more accurate predictions of incidents resulting in loss.** This prediction also enables companies to estimate how many policies they need to write to cover the expected annual losses.

Credit:
KEMAL BA
E+
Getty Images

For example, if experience indicates that one out of every 75 car insurance policies results in a claim each year and the company insures 150 people, the company reasonably expects two claims per year. If the company only insures 15 people, it is harder to predict if one of those 15 is likely to be involved in an accident.

Learn more about Statistics-
Q:
## What is a good idea for a statistics project?

A: A good idea for a statistics project would be to investigate the distributions of returns for different investments, and then construct and manage a model ... Full Answer >Filed Under: -
Q:
## How do you calculate the relative standard deviation percent?

A: To calculate the relative standard deviation, divide the standard deviation by the mean and then multiply the result by 100 to express it as a percentage. ... Full Answer >Filed Under: -
Q:
## What is a favorable outcome in mathematics?

A: In mathematics, particularly in the field of statistics, a "favorable outcome" refers to the result of an event. A favorable outcome divided by all possibl... Full Answer >Filed Under: -
Q:
## What is an example of a basic hypothesis test?

A: A basic hypothesis test measures the outcome of a probability function or equation for the validity of an expected or returned result. Typically, a basic h... Full Answer >Filed Under: