1) Proper classification of risk does not negate the law of large numbers. The law basically tells us that the more policies we write, the closer we can expect the actual results to be to the projected results.
2) Proper classification of risk actually helps in these projections because it reduces the chance of adverse selection allowing the risk pool to look more as expected.
3) Refined analysis and classification has not led to only offering insurance to the lowest cost risks. It has led more companies to offer coverage to higher cost risks that they now understand.
4) The low cost insured is not risk free. Losses will happen. With the proper price, insurance is still a good deal.
5) 15% is not 300% greater than 5%. I find it by realizing that 10% is 100% greater than 5%, or that 5% is not 100% greater than 5%. 15% is 300% OF 5% as 5% is 100% OF 5%.
I have a few issues with this analysis:
1) Proper classification of risk does not negate the law of large numbers. The law basically tells us that the more policies we write, the closer we can expect the actual results to be to the projected results.
2) Proper classification of risk actually helps in these projections because it reduces the chance of adverse selection allowing the risk pool to look more as expected.
3) Refined analysis and classification has not led to only offering insurance to the lowest cost risks. It has led more companies to offer coverage to higher cost risks that they now understand.
4) The low cost insured is not risk free. Losses will happen. With the proper price, insurance is still a good deal.
5) 15% is not 300% greater than 5%. I find it by realizing that 10% is 100% greater than 5%, or that 5% is not 100% greater than 5%. 15% is 300% OF 5% as 5% is 100% OF 5%.