Question
Find the correct statement(s) about deductibles? The lower the deductible the lower the cost of insurance. Deductibles can help make policyholders more loss conscious. Increasing
Find the correct statement(s) about deductibles?
The lower the deductible the lower the cost of insurance.
Deductibles can help make policyholders more loss conscious.
Increasing the deductible tilts the balance in the risk retention/risk transfer trade-off towards the firm/individual who is transferring risk.
1 and 2 |
2 only |
3 only |
2 and 3 |
All three are true.
The University of Iowa has a fleet of 60 similar vehicles each worth $20,000 and wants to set a deductible so that they retain no more than $1,500 per year in collision damages at a safety level of 95%. Long-term statistics suggest an average number of 2 crashes per year and an expected loss of $750 per crash. Based on the Poisson distribution, UIs risk manager obtains the following table:
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