Based on historical data, an insurance company estimates that a partic

korporasidn

korporasidn

Answered question

2021-11-30

Based on historical data, an insurance company estimates that a particular customer has a 2.9% likelihood of having an accident in the next year, with the average insurance payout being $1800.
If the company charges this customer an annual premium of $190, what is the companys

Answer & Explanation

George Blue

George Blue

Beginner2021-12-01Added 18 answers

Step 1
Given information
Probability of accident =0.029
Insurance payout =$1800
Annual Premium =$190
AmountP(X)1800+190=16100.0291900.971
Step 2
Expected value of the insurance policy is given by
E(X)=1610×0.029+190×0.971=137.8

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