If the probability of a house fire is 0.006, the cost of the thefire is...

If the probability of a house fire is 0.006, the cost of the the fire is $377631, the insurer’s loading costs are $26786, and the number of policies is 1860, then in a competitive insurance market, each policy will cost $____.

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Expert Solution

Probability of fire = 0.006

Cost of fire = 377631

Number of policies = 1860

Total cost due to fire = 0.006 * 377631 * 1860 = 4214361.96

Insurer's loading costs = 26786

Cost of each policy = (4214361.96+26786)/1860 = 2280.19

Rahul Sunny answered 1 year ago

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