Question

Xi ~ Uniform [USD 0, USD 40,000] Population is equally distributed between robust (good health people) and frail people (low health people). Robust population do not demand this insurance contract as they expect to have their health care costs lower than the premium amount P= USD 20,000. On the other hand, Frail population decide to purchase this insurance deal as they expect their health care costs greater than the premium amount P= USD 20,000.

• Please define and explain the market situation that insurance company ABC is exposed to in 2019. Please draw a figure with a uniform distribution and clearly show the regions defining market demand for insurance. Summarize insurance company ABC’s financial statement and find expected profit or loss per customer on average. [Hint: Find receivables from customers and payables to customers for health care].

• You are a consultant and you suggest insurance company ABC to raise its insurance premiums to P= USD 30,000 for 2020. Does this new premium save the insurance company’s cash flow when each custumer’s health care costs is USD 30,000 to an insurance company? Please draw a figure with a uniform distribution and clearly show the regions defining market demand for insurance with the new premium. Summarize insurance company ABC’s financial statement and find expected profit or loss per customer on average. [Hint: Find receivables from customers and payables to customers for health care]. Please define and explain the market situation that insurance company ABC is exposed to in 2020 with the new premium.

Answer 1

INSURANCE plays an vital role in the economy nows a days. it protect both from known and unknown events. now a days we face a problem called COVID 19 nobody knows before that it is a epedamic for all. BECAUSE it is belived that future is uncertain, so in order to protect our future we take a health policy.

-But views are different among people to people. everyone have their own theory and discribed accordingly. SOME one belived that we considered more concious to our health and premium paid is just wastful they are called health concious people and other totally opposite to that who spend money to buy policy and protect himself and their family for uncertain future.

There is positive relationship exit between no. of insurer and FRAIL (LOW health people). they paid premium and no. of insurer are high they good from company point of view. they protect their family too.

On the other hand NEGATIVE relationship exit between robust(good health people) and the no. of insurer. total no. of cases are less of these types of family they belived that there exp. on health is much lower than payment on the premium. so they ignore to take policy.

There are various benefit of insurance policy:

# It cocerage against various types of medical expences.

# CASHLESS claim benefit also aries.

# it also covered against critical illness

# tax benfit also in 80C.

2020

- As per graph clearly shows that there is nehative relationship exit between no. of health polcy and the premium amount, as premium amount increases from $20,000 to $30,000  no. of policy taken reduces. Hence it is the policy of the company to raise their policy by reducing premium amount.

Also robut previouly not taken policy with $20,000 now due to increases amount to $30,000 not even to take policy,as argue more premium and there exp on the health concious is lesser.