Question: The probability distribution for damage claims paid by a national car insurance company on collision waiver insurance follows.

1. Use the expected collision waiver payment to determine the collision insurance premium that would enable the company to break even.
2. The insurance company charges an annual rate of €390 for the collision waiver coverage. What is the expected value of the collision policy for a policyholder? (Hint: It is the expected payments from the company minus the cost of coverage.) Why does the policyholder purchase a collision waiver policy with this expected value?

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Solution: The downloadable solution consists of 2 pages
Deliverable: Word Document