An insurance company is considering offering a new product that provides coverage for natural disasters, such as
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An insurance company is considering offering a new product that provides coverage for natural disasters, such as hurricanes and earthquakes. The company estimates that the probability of a natural disaster occurring in a given year is 5%, and the expected payout for a claim is $100,000. The company plans to charge a premium of $10,000 per policy. The company has a goal of maintaining a loss ratio of no more than 80%, which means that the total payouts should not exceed 80% of the total premiums collected. What is the maximum number of policies the company can sell before reaching its loss ratio target?
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