Final answer:
Insurers use the Law of Large Numbers to predict financial needs for claims, administrative costs, and profits, and segment clients into risk groups for actuarial fairness.
Step-by-step explanation:
Insurers can use the Law of Large Numbers to predict how much money they will need to cover claims, administrative costs, and to ensure they maintain a profit. The Law of Large Numbers allows insurance companies to work out that the total payments made by the average person over time should be enough to cover that individual's claims and the costs of running the company, while still leaving room for profits. Additionally, insurers segment individuals into risk groups to charge them appropriately, based on their predicted losses, thus aiming for what is known as actuarial fairness.