A company offers full insurance coverage for a smartphone valued at $1,000. Based on historical data, there is a 5% chance the phone will be stolen within the one-year policy period, resulting in a total loss. To precisely cover its anticipated average payout for this policy, what is the minimum premium the company should charge?

Premium Pricing Strategy for a Car Share Service

Calculating a Composite Insurance Premium

Evaluating a Uniform Premium Strategy

A company insures a fleet of delivery drones, each valued at $2,000. Based on operational data, there is a 10% probability of a drone being lost or damaged beyond repair during a one-year policy period. The company sets the annual premium for each drone at $180, stating that this price is intentionally set $20 below the average expected cost of a claim in order to attract more customers. Is the company's statement about its pricing strategy accurate?

An insurance company offers full coverage for several different assets. Match each asset profile (value and probability of total loss over the policy period) with the minimum premium required to exactly cover the expected claim.

Analyzing a Uniform Insurance Pricing Strategy

An insurer provides a policy for a piece of art valued at $50,000. Historical data suggests a 0.5% probability of a total loss due to damage or theft during the one-year policy term. To exactly cover the average anticipated cost of a claim, the insurer must charge a premium of $____.

An insurance company offers two separate one-year policies for full coverage against total loss.

• Policy A is for a piece of equipment valued at $5,000 with a 4% probability of loss. The premium for Policy A is $240.
• Policy B is for an art piece valued at $20,000 with a 1% probability of loss. The premium for Policy B is $230.

Which policy has a larger 'loading charge' (the amount charged in the premium that exceeds the mathematically expected claim cost)?

Calculating a Premium for Multiple Risk Scenarios

Formula for Insurer's Expected Payoff