The Law of Large Numbers implies that increasing the sample size will do what to the accuracy of loss projections?

• A. Increases
• B. Decreases
• C. Stays the same
• D. Becomes random

Answer: (A)

Increasing the sample size makes loss projections more accurate. The Law of Large Numbers means that as you collect more data, the average of observed losses gets closer to the true average loss. With more data, random fluctuations have less influence, so the estimate becomes more reliable. In practical terms, the standard error of the average loss shrinks roughly with 1 over the square root of the sample size, so accuracy improves as n grows. The other options don’t fit because accuracy doesn’t worsen with more data, it doesn’t stay the same, and it doesn’t become random with more observations.