Question

Q1. Which category of insurance has nature of low frequency but high severity?
Marine Insurance
Crop Insurance
Airline Insurance
Life Insurance​

Answer 1

Explanation:

The category of insurance that has nature of low frequency but high severity is the Insurance of natural disasters like earthquakes or fire insurance. The insurer and the risk bearer are interested in frequency that means the loss and severity that means the cost of loss

Answer 2

Crop Insurance category of insurance has nature of low frequency but high severity

Option b

Explanation:

• The method of Frequency severity is is amount of  claim that an insurer is expected to get.  The severity of the claim is the total value of the claim in regards to the costs involved. Low severity is lesser costs involved in the claim
• Low frequency is when less number of claims are expected and higher the frequency more number of claims are expected. Normally to calculate the frequency and severity of a claim the insurance companies make use of "historical data".
• Normally the risk factors for crop insurance have very little chance of taking place. But if any form of disaster does occur and the crops are damaged than it has a major severity and loss for the farmers

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