XYZ Company specializes in the production of Suds-Away, an environmentally friendly dishwashing detergent for homes. The...

 

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XYZ Company specializes in the production of Suds-Away, an environmentally friendly dishwashing detergent for homes. The net worth of XYZ company is GHC2,000,000. The Company's liability exposure, L, for the coming year is given by L = {GHCO with probability 0.975 GHC250000 with probability 0.015 GHC1000000 with probability 0.01 1. The administrative charge of the company's insurers GHC1000 is incurred at the inception of the insurance contract. Suppose insurers fair profit loading GHC500, and that the interest rate is 5%, determine the fair premium in each of the following cases. i) Full insurance ii) GHC50000 deductible and 20% co-insurance. iii) GHC50000 deductible, 20% co-insurance and GHC750000 limit. II. Write down the wealth distribution of XYZ Company. Use the concave utility function u(x) = √x to assess the fairness of the full insurance charged by its insurers. XYZ Company specializes in the production of Suds-Away, an environmentally friendly dishwashing detergent for homes. The net worth of XYZ company is GHC2,000,000. The Company's liability exposure, L, for the coming year is given by L = {GHCO with probability 0.975 GHC250000 with probability 0.015 GHC1000000 with probability 0.01 1. The administrative charge of the company's insurers GHC1000 is incurred at the inception of the insurance contract. Suppose insurers fair profit loading GHC500, and that the interest rate is 5%, determine the fair premium in each of the following cases. i) Full insurance ii) GHC50000 deductible and 20% co-insurance. iii) GHC50000 deductible, 20% co-insurance and GHC750000 limit. II. Write down the wealth distribution of XYZ Company. Use the concave utility function u(x) = √x to assess the fairness of the full insurance charged by its insurers.

Answer rating: 100% (QA)

i Full insurance ANS WER The fair premium for full insurance would be the expected value of the liab... View the full answer