You are an executive at a major auto insurance company. You have been tasked with predicting...
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You are an executive at a major auto insurance company. You have been tasked with predicting the break-even price you would need to charge a 25-year-old driver to insure his brand-new Ford Mustang. You have a lot of data on 25-year-old drivers and on Ford Mustangs. You know that 25-year-old Mustang drivers have accidents On average, 1 out of every 100 has an accident that costs the insurance company $15,000, 3 out of every 100 has an accident that costs the company $7,500. S out of every 100 has an accident that costs the company $2,500 dollars. A. What is the minimum price you would need to charge just to cover these costs? Show your work (5 points) B. Now, assume that you had no information about Ford Mustangs (that they were a brand-new auto type, for example). Still, you have to come up with a price that makes sense for you to at least break even on the auto policy. Tell me how you could go about predicting a reasonable price. Note: you don't have to come up with a different price-just tell me how you could go about getting there. (4 points). Hint: There are several ways and methods we've discussed that would help to establish a price Walk me through your thought process on the one or two you choose. You are an executive at a major auto insurance company. You have been tasked with predicting the break-even price you would need to charge a 25-year-old driver to insure his brand-new Ford Mustang. You have a lot of data on 25-year-old drivers and on Ford Mustangs. You know that 25-year-old Mustang drivers have accidents On average, 1 out of every 100 has an accident that costs the insurance company $15,000, 3 out of every 100 has an accident that costs the company $7,500. S out of every 100 has an accident that costs the company $2,500 dollars. A. What is the minimum price you would need to charge just to cover these costs? Show your work (5 points) B. Now, assume that you had no information about Ford Mustangs (that they were a brand-new auto type, for example). Still, you have to come up with a price that makes sense for you to at least break even on the auto policy. Tell me how you could go about predicting a reasonable price. Note: you don't have to come up with a different price-just tell me how you could go about getting there. (4 points). Hint: There are several ways and methods we've discussed that would help to establish a price Walk me through your thought process on the one or two you choose.
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Related Book For
The Legal Environment of Business
ISBN: 978-0538473996
11th Edition
Authors: Roger E Meiners, Al H. Ringleb, Frances L. Edwards
Posted Date:
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