What is the expected value of the collision policy holder

Reference no: EM13148382

he probability distribution for collision insurance claims paid by The Newton Automobile Insurance Company is as follow:
Claims Probability
0 0.90
500 0.04
1000 0.03
2000 0.01
3000 0.01
4000 0.01

A) Use the expected collision claim amount to determine the collision insurance premium that would allow the company to break even on the collision portion of the policy?

B) the insurance company charges an annual rate of $250 for the collision coverage. What is the expected value of the collision policy holder?

C) Why does the policy holder purchase a collision policy with the expected value in B)?

Reference no: EM13148382

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