Which term describes the likelihood of a claim being filed?

The correct term that describes the likelihood of a claim being filed is known as "claims frequency." This term specifically refers to how often claims occur within a certain period or among a specific group, providing a quantitative measure of expected claims related to a particular insurance policy or type of insurance. Understanding claims frequency is essential for insurers as it helps them assess risk and set appropriate premiums.

The concept of claims frequency is integral to insurance as it enables companies to analyze past claim patterns and predict future claims, which ultimately influences their underwriting processes and overall risk management strategies. Insurers utilize this information to determine the likelihood of a claim arising from a policyholder's actions or circumstances, aiding in decision-making about coverage limits and policy terms.

In contrast, moral hazard refers to the increased likelihood of a policyholder engaging in risky behavior once they are insured, which can indirectly affect claims frequency but does not capture the likelihood of a claim being filed. Risk factor is a broader term that encompasses various elements contributing to risk, rather than indicating the frequency of claims specifically. Underwriting is the process insurers use to evaluate the risk of insuring a person or asset and determines whether to provide coverage and at what price, but it does not inherently describe the frequency of claims. Thus, claims frequency