Law of Large Numbers

The “Law of Large Numbers” refers to the fact that any probability, given enough time or chances of occurring (numbers) will tend towards the statistically predicted outcome. The Law of Large Numbers is typically employed by agencies such as insurance companies who serve a large number of clients and want to predict the statistical likelihood they will have to pay out the insurance. This, in turn, can help determine the premiums of the insurance business in order to keep it successful and competitive.

Example: A coin flipped 10 times may flip heads every time. Flip it a thousand more times, and it’s extremely likely that the results will tend to be close to 50% heads and 50% tails, assuming the coin is balanced.