The law of large numbers says that when many people are insured, the probability distribution of the losses will assume a normal probability distribution, a distribution that complicates pricing in life insurance. allows accurate predictions. hinders accurate predictions. is difficult to work with.

Question

Alayna Pitts

Business

1 June, 14:14

The law of large numbers says that when many people are insured, the probability distribution of the losses will assume a normal probability distribution, a distribution that complicates pricing in life insurance. allows accurate predictions. hinders accurate predictions. is difficult to work with.

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Answers (1)

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Camryn Holland · Answer 1

allows accurate predictions.

Explanation:

The law of large numbers states that the larger the amount of policy holders, the probability distribution of the number of claims (losses for the insurance company) will be shaped like a normal distribution. This allows the companies to make more accurate predictions about the future number of claims.

In statistics, the law of large numbers states that as the sample size increases, the mean will be much closer to the real mean of the total population.