What concept is most closely related to objective risk for health insurers?

Objective risk is a key concept in insurance that refers to the variability of potential losses. It is often quantified using statistical measures, with dispersion being a primary focus as it represents how spread out the potential outcomes are. Standard deviation, as a measure of dispersion, quantifies how much the values of a variable differ from the mean value, which is critical for health insurers to assess the unpredictability in claims and manage reserves appropriately.

Understanding the dispersion of insurance claims helps insurers in pricing their products accurately and ensuring they are adequately prepared for future claims. This statistical approach allows for a more objective evaluation of risk, as it relies on empirical data rather than subjective perceptions.

In contrast, the other options touch on related but distinct concepts. Expense ratios pertain to operational efficiency and costs relative to premiums; carve-out coverage relates to specific healthcare services being provided separately from general health plans; and investment underwriting focuses on the management of the insurer's investment portfolio rather than the direct assessment of risk associated with health insurance.