If the average probability of an accident of those insured with Patakazo is 7%, and the...
If the average probability of an accident of those insured with
Patakazo is 7%, and
the average value of the cars insured by the same company is
$23,000, what is the
average premium paid by New Yorkers insured with Patakazo if we
assume the
insurance company makes zero economic profits.
How do you solve this?
Homework Answers
if an insurance company makes zero economic profit then it has charged actuarial fair premium
Actuarial fair premium = probability of loss * amount of insurance purchased
= 0.07*23000
= $1610
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