$550 is the minimum premium payment.
The bare minimum premium went up by $18.4
Policyholders are 30,000
Rate of accidents: 0.06
Accidental deaths = 30,000*0.06 = 1800
If this year's required profit for the business is $1,740,000 and the payout for each claim (after deductibles) is $8,200
Total compensation equals each claim's payout times the number of claims.
Total compensation: 8200 × 1800, = $14,760,000
Total minimum premium now equals total payout plus profit.
= $ 14,760,000+ $1,740,000
= $ 16,500,000.
Total minimum premium / the number of policyholders equals the minimum premium charge.
= $ 16,500,000 ÷ 30,000
= $550
Thus the minimum premium charge = $550
The accident rate will rise by 5%, or 1.05, in this case.
Add this rate to the prior accident rate.
0.06 × 1.05 = 0.063
Rate of accidents: 0.063
The number of policyholders will rise by 1.12 times (12%).
30,000*1.12 = 33600
Accident total = 33600*0.063 = 2116.8
Total payout = each claim's payout × Amount of complaints
8200 × 2116.8 = $ 17357760
Minimum total premium equals total payout plus profit
= $ 17357760 + $ 1,740,000 = $19,097,760
Total minimum premium / the number of policyholders equals the minimum premium charge.
$ 19,097,760 / 33600 is the minimum premium fee.
568.4 - 550
= 18.4 $
The minimum premium increased by $18.4
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