An automotive insurance company has 30,000 policyholders, and the accident rate is 0.06. If the company needs to make a profit of $1,740,000 this year and the p
Mathematics
hmanion2017
Question
An automotive insurance company has 30,000 policyholders, and the accident rate is 0.06. If the company needs to make a profit of $1,740,000 this year and the payout for each claim (after deductibles) is $8,200, the minimum premium it must charge is
2 Answer

1. User Answers Edufirst
Number of accidents = number of policyholders * accident rate = 30,000 * 0.06 = 1,800
Total payout = payout per each claim * number of claims
Number of claims = number of accidents
=> Total payout = $8,200 * 1,800 = $ 14,760,000
Total minimum premium = total payout + profit = $ 14,760,000 + $ 1,740,000 = $ 16,500,000.
Minimum premum charge = total minimum premum / number of policyholders
Minimum premium charge = $ 16,500,000 / 30,000 = $550
Answer: $ 550 
2. User Answers kayhoover2002
Answer:
The plato answer is $500
Stepbystep explanation: