# probability

degree of likelihood that something will happen. Probabilities are expressed as fractions (1/2, 1/4, 3/4), as decimals (.5, .25,.75), or as percentages (50%, 25%, 75%) between 0 and 1. For example, a probability of 0 means that something can never happen- a probability of 1 means that something will always happen. The probability of an event is calculated as follows:

p(a) = | Number of Outcomes Favorable to the Occurrence of the Event Total Number of Possible Outcomes |

chance that an event will occur. The foundation of insurance is probability andstatistics. By pooling a large number of homogeneous exposures an insurance company can predict with a given degree of accuracy the chance that a policyholder will incur a loss. The company reflects this expectation in the pure cost of insurance, known as the pure premium. The chance that an event will occur can be expressed as follows:

Probability of Event Occurring | = | Number of Successful Ways Event Can Occur Total Number of Ways Event Can Occur |

For example, the probability of rolling a six on one die can be expressed as:

P (6) | = | 1 6 |

chance or likelihood that something will happen or has happened.

Referring Terms: calculable change of losschange of loss

probability of loss

simple probability

theory of probability

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