ABC insurance company plans to sell homeowners insurance in Riyadh. ABC expect that 8 homeowners out of

Question

Question: ABC insurance company plans to sell homeowners insurance in Riyadh. ABC expect that 8 homeowners out of every 100, on average, will report claims each year. The variation between the rate of loss that ABC expects to occur and the rate of loss that actually does occur is called

Options:

1.  Objective probability
2.  Subjective probability
3.  Objective risk
4.  Subjective risk

Answer 1

3. Objective risk

ABC insurance company plans to sell homeowners insurance in Riyadh. ABC expect that 8 homeowners out of every 100, on average, will report claims each year.

The variation between the rate of loss that ABC expects to occur and the rate of loss that actually does occur is called Objective risk.