Question

A policyholder has probability 0.7 of having no claims, 0.2 of having exactly one claim, and 0.1 of having exactly two claims. Claim amounts are uniformly distributed on the interval [0,60] and are independent. The insurer covers 100% of each claim. Calculate the probability that the total benefit paid to the policyholder is 48 or less.

Answer 1

Answer:

0.89.

Step-by-step explanation:

So, we are given the following data or parameters or information which is going to aid in the solution to this question or problem. So, the data or parameters are;

(1). "probability 0.7 of having no claims, 0.2 of having exactly one claim, and 0.1 of having exactly two claims."

(2). " distributed on the interval [0,60] and are independent."

(3). "The insurer covers 100% of each claim."

So, taking (1) above we will have;

(Total probability= 0.7 + 0.2 + 0.1 = 0.1)

A = { (0.7 × 0)^2 + (0.2 × 1)^2 + ( 0.1 × 2)^2 =( 0.4) +( 0.4) = 0.8.

0.8 + total probability = 0.8 + 0.1 = 0.9.

So, from the question, we are to "Calculate the probability that the total benefit paid to the policyholder is 48 or less."

Hence, P< 48/A = P < 48/0.9 = P < 53.33.

Thus, 53.33/60 = 0.89.