Question
An actuary at an insurance company estimates from exsiting data that on a $1000 policy an average 1 and 100 policyholders will file a 20000 claim. in average of 1 in 200 policyolders will file a 50000 claim in average 1 in 500 policyholders will file a 100000 claim.
a. what is the expected value to the company for each policy sold.
b. if the company sells 100000 policies can it expect a profit. explain your assumptions of this calculation.
a. what is the expected value to the company for each policy sold.
b. if the company sells 100000 policies can it expect a profit. explain your assumptions of this calculation.