Assume a pool of 115 people in an insurance pool (a group of people insured throughcommunity rating). It is estimated that a small number in the pool will have significant pre-existing conditions as indicated in the table.Based on the age of these 115 people, the insurance company estimates the followingdistribution of health care claims (which includes necessary profit and administrative costs of theinsurance company).Number of InsuredAntidipated Heath Costs/Year/Person$1,400$1,500$1,600$1,700$1,800$1,900$2,000$2,100$2,200$2.300$2,400$2,500$2,700$2,000$2,900$3,000$3,100$3.200$3.300$4,00057,00$10,000Everyone joins the poal ad pays the necessary premum in the first year. The clams experience of the customers isfaund to be generaly consstent with expeclations of the insurance company.A) What would be the premium In the third year if there is no inflation, based on thecompany's oxperience from the past year?B) If those customers who have anticipated claims less than 75 percent of the premiumnow decide that it is not rafional to buy insurance, how many will decide to be insured?

The common premium for the pool of insured can be calculated by summating the insurance premiums and…

Answered: Assume a pool of 115 people in an…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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