Alberta General Insurance Level 1 Practice Exam

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What is a key consideration for insurers in selecting risks?

  1. The diversity of insured demographics

  2. The potential for high investment returns

  3. The likelihood of incurring less losses than premiums paid

  4. The size of the insured's business

The correct answer is: The likelihood of incurring less losses than premiums paid

One key consideration for insurers in selecting risks is the likelihood of incurring less losses than premiums paid. This is important because insurers want to make sure that they are not taking on too much risk and potentially having to pay out more in losses than they receive in premiums. Option A may be a factor in determining premiums, but it is not the key consideration for selecting risks. Option B may be a consideration for insurers, but it is not the main concern when selecting risks. Option D, the size of the insured's business, may also play a role in determining premiums, but it is not the primary factor in selecting risks.

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