Suppose that a group of 300 individuals are seeking health insurance and have combined expected medical...

Suppose that a group of 300 individuals are seeking health insurance and have combined expected medical expenditures of $1,200,000 for the upcoming year. What would the actuarially priced premium be for each member of the group? If the insurance company places a 15% loading fee on each policy, how much would they charge for each policy.

Solutions

Expert Solution

Combined Medical Expenditure is $1200000 and 15% is loading fee. Hence total cost the insurance company need to recover through premium is 1200000*(1+15%)= 1200000*1.15 = $1380000

This amount is to be recovered by way of premium from 300 individuals. Hence premium to be charged for each policy = 1380000/300 = $4600

Hence the Premium for each policy will be $4600

Rahul Sunny answered 1 year ago

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