Case study "BASIX"

BASIX develops a weather insurance of which payoff depends on rainfall across three stages. You need to answer the questions in "Decision" section on page 7.

"Would the policy sell well? What was the best way to explain it to potential clients? Some had expressed concern that the private insurance company with which BASIX was working might "gouge" its captive clients. Was the policy fair? How would it help BASIX clients? Finally, were there any other important risks, costs, or benefits that Ramana had not considered?"

To do 1. 2. 3.

4. 5. 6. 7.

so, you have to do the followings.

Read the case study and understand potential risks, costs, or benefits of the weather insurance From Exhibit 5 (especially, from policy details below tables), understand the structures of the weather insurance in 2003 and 2004

Simulate rainfall by using the numbers in Exhibit 6 "Historical Rainfall Data" on Page 14 Use the simulated rainfall to calculate expected payoffs for the insurance in 2003 and 2004 Based on the premium (in Exhibit 5) and expected payoffs, answer the question "Would the policy sell well?" and "Was the policy fair?"

You need to develop an approach to answer "What was the best way to explain it to potential clients?" With the background of customers, answer "How would it help BASIX clients?" and "Finally, were there any other important risks, costs, or benefits that Ramana had not considered?"