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In case ‘Insurance companies’ profits and the no of claims they have to pay “——
- a)positive correlation
- b)negative correlation
- c)no correlation
- d)none
Correct answer is option 'B'. Can you explain this answer?
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In case Insurance companies profits and the no of claims they have to ...
Explanation:
Correlation is a statistical measure that measures the relationship between two variables. It can be positive, negative, or no correlation at all.
In the given scenario, when insurance companies' profits increase, it means they are earning more than they are paying in claims. On the other hand, when the number of claims they have to pay increases, it means their profits decrease.
Therefore, there is a negative correlation between insurance companies' profits and the number of claims they have to pay. This means that as one variable increases, the other variable decreases, and vice versa.
Some possible reasons for this negative correlation are:
- When insurance companies have to pay more claims, it means they are experiencing more losses, which reduces their profits.
- Insurance companies may increase premiums to compensate for the increased claims, but this may lead to customers switching to other insurers or reducing their coverage, which may further reduce the company's profits.
- Insurance companies may also invest their profits to generate more revenue, but if their investments perform poorly, it may also affect their profits.
In conclusion, the negative correlation between insurance companies' profits and the number of claims they have to pay highlights the importance of managing risk and balancing premiums and payouts to ensure long-term financial stability.
Correlation is a statistical measure that measures the relationship between two variables. It can be positive, negative, or no correlation at all.
In the given scenario, when insurance companies' profits increase, it means they are earning more than they are paying in claims. On the other hand, when the number of claims they have to pay increases, it means their profits decrease.
Therefore, there is a negative correlation between insurance companies' profits and the number of claims they have to pay. This means that as one variable increases, the other variable decreases, and vice versa.
Some possible reasons for this negative correlation are:
- When insurance companies have to pay more claims, it means they are experiencing more losses, which reduces their profits.
- Insurance companies may increase premiums to compensate for the increased claims, but this may lead to customers switching to other insurers or reducing their coverage, which may further reduce the company's profits.
- Insurance companies may also invest their profits to generate more revenue, but if their investments perform poorly, it may also affect their profits.
In conclusion, the negative correlation between insurance companies' profits and the number of claims they have to pay highlights the importance of managing risk and balancing premiums and payouts to ensure long-term financial stability.
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In case Insurance companies profits and the no of claims they have to pay a)positive correlationb)negative correlationc)no correlationd)noneCorrect answer is option 'B'. Can you explain this answer?
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