An insurer writing hundreds of thousands of similar homeowners policies can price them because the law of large numbers holds that:
Explanation
The law of large numbers says that the larger the group of similar exposure units, the more closely actual loss experience will match the expected experience, which is what makes rating possible. It does not change the odds facing any individual insured, so the choice saying more policies lower the chance of loss reverses the idea. Reinsurance is still bought to handle severity and catastrophe accumulation.
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