An insurer evaluating a group of applicants for medical expense coverage measures how often members of the group file claims and how large those claims tend to be. These two measures describe the loss exposure's:

Why A is correct

A loss exposure is analyzed by two dimensions: frequency — how often losses occur — and severity — how large each loss is when it does occur. Together they determine the expected cost of the exposure and the appropriate premium. For example, frequent small claims and rare catastrophic claims require very different pricing and risk management responses. This frequency–severity analysis is a foundational tool in underwriting and rate-making.

Why the other options are wrong

• B) Peril is the cause of loss and hazard is a condition increasing loss likelihood; neither is a measurement dimension of the exposure.
• C) Premium and policy period are contract features, not analytical dimensions of the loss exposure itself.
• D) Indemnity and insurable interest are principles governing recovery and standing, not measures of exposure.

Memory hook

Frequency says how often the doorbell rings; severity says how big the bill is when it does.