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Mirian I.

asked • 03/03/15

Expected Value Insurance Claims

Based on an insurance company's past data, each year an average of 1/90 policy holders make a claim of $250, 1/100 policy holders make a claim of $12,000, and 1/400 make a claim of $17,000.

1. What would the insurance company have to charge per policy-holder to break even? (i.e., what the premium would have to be in order to have an expected profit of zero.)

? (Round to the nearest dollar.)

2. A vehicle insurance policy sells for $350 annually. What is the expected profit or loss for the company per policy-holder over the course of the year?

? (Round to the nearest dollar.)

3. If the company sold 375 policies what would the overall expected profit or loss be?

? (Round to the nearest dollar and do not use commas.)

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