Multiple choice general knowledge

Claim costs for each benefit is calculated by Insurance company as

  1. Claim costs = hospital expenses + surgical expenses+physicians fees + major medical expenses

  2. Claim costs = frequency of expected claim * average amount of each claim

  3. Claim Costs = (hospital expenses + Board Expenses ) * frequency of claims

  4. None of the Above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Insurance actuaries calculate expected claim costs by multiplying claim frequency (how often claims occur) by severity (average claim amount). This fundamental formula (frequency × average claim) underlies all premium calculations. Option A incorrectly lists specific expense categories without the frequency multiplication that drives risk assessment.

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