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The following two groups have the following expected claims distributions: Kerugian/ Loss Kebarangkalian kerugian Probability of Loss Kumpulan / Group A: Ibu-ibu pengendali kilang/ Factory
The following two groups have the following expected claims distributions:
Kerugian/ Loss | Kebarangkalian kerugian Probability of Loss | |
Kumpulan / Group A: Ibu-ibu pengendali kilang/ Factory operator mums | RM15,000 | .15 |
RM7,500 | .20 | |
RM2,000 | .25 | |
RM0 | .40 | |
| ||
Kumpulan / Group B: Suri rumah / Stay-at-home mums | RM15,000 | .06 |
RM7,500 | .12 | |
RM2,000 | .28 | |
RM0 | .52 |
- What are the expected claims costs for group A and group B, respectively?
- What are the expected average claims cost per policy for a pool in which 50% of the participants have claims distributions identical to group A and 50% have claims distributions identical to group B.
- If insurers cannot distinguish the high- and low-risk groups, what is the potential problem with charging everyone in the pool a premium equal to the expected average claims costs?
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