Alberta General Insurance Level 1 Practice Exam

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What does a higher severity of loss indicate?

  1. Lower premiums

  2. Fewer claims filed

  3. Larger average losses

  4. Better loss experience

The correct answer is: Larger average losses

A higher severity of loss indicates that the average amount paid out for each claim is larger. This means that insurers may have to pay more to compensate for losses, therefore contradicting options A and D. Additionally, it does not necessarily indicate fewer claims filed as option B implies. Therefore, the most accurate answer would be option C.

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