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6. In year 2019, claim amounts follow a Pareto distribution with parameters a = 3 and = 800. The annual inflation rate is 8%.

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Answer #1

Loss Elimination Ratio :- - Loss Elimination ratio it is the ratio in recluction in estimated payment with franchise deductibson parameter thata (0) with inflation is - 800x640,08) - 86 (1,08) 864 =) لا (2) ( 864 (3ect 69 ( 2 1162 = 3 ( = 05sec) (مولPr. (x>d) - Pr. Cx2300) -1.864 864 +300) (0.748268)} & 0.40896 RCxd) Pr CX300)(80) no 40896 x 300 122.688 so, LER = [[[x] - P71.297 432 16.50% This means, by introducing of 300 we can eliminate franchise decluctible 16.50% of losses.

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