What will be the cost of sharing

Reference no: EM132959495

Topic: Risk Management - INSURANCE

A. Jack and Jill decide they cannot afford to buy auto insurance. They are in a class with 160 students, and they come up with the idea of sharing the automobile risk with the rest of the students. Their professor loves the idea and asks them to explain in detail how it will work. Pretend you are Jack and Jill. Explain the following:

a. If you expect to have only three losses per year on average (frequency) for a total of $10,000 each loss (severity), what will be the cost of sharing these losses per student in the class?

b. Do you think you have enough exposures to predict only three losses a year? Explain.

B. How do the Agents and Brokers differ?

Reference no: EM132959495

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