According to the Law of Large Numbers, as the number of units in a group increases, what becomes more likely?

Study for the Michigan Surplus Lines Test. Prepare with flashcards and multiple choice questions, each question has hints and explanations. Get ready for your exam!

The Law of Large Numbers states that as the size of a sample or group increases, the average of the sample outcomes will get closer to the expected value or true average of the entire population. This principle is fundamental in statistics and probability theory, particularly in the field of insurance.

In the context of insurance, as the number of insured units (like cars, homes, or businesses) increases, insurers are better able to predict the overall frequency and severity of losses. This enhancement in predictability arises because the larger the group, the more homogenous the risk becomes, leading to a more reliable average and reducing the impact of outliers.

This concept allows insurance companies to set premiums more accurately based on calculated risk rather than estimates, ultimately leading to a more stable insurance market. Hence, the ability to predict outcomes improves as the number of units in the group increases.

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