A Home Insurance Company Anticipates the Following Pattern of Claims

question 10

Multiple Choice

A home insurance company anticipates the following pattern of claims, based on historical data. What is the standard deviation of claims? $\begin{array}{c}\begin{array}{|c|}\hline\\\\\\\text { Type of Claim }\\\hline1 \\\hline 2 \\\hline 3 \\\hline 4\\\hline\end{array}\begin{array}{c}\hline\\\\\\\text { Size of Claim }\\\hline \$ 200,000 \\\hline \$ 50,000 \\\hline \$ 2,000 \\\hline \$ 0\\\hline\end{array}\begin{array}{|c|} \hline \text {Number of}\\\text { Claims out of}\\\text {10,000 Policy }\\\text {Holders}\\\hline 1 \\\hline 10 \\\hline 200 \\\hline 9,789\\\hline \end{array}\begin{array}{c|}\hline\\\\\\\text { Probability } \\\hline 0.0001 \\\hline 0.001 \\\hline 0.02 \\\hline 0.9789\\\hline\end{array}\end{array}$

• A)$2,562.79
• B)$6,567,900
• C)$2,000
• D)$110
• E)$3,753.52

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Definitions:

Repair Costs

Expenses incurred to fix or restore damaged or worn-out goods or property to their original condition.

Legal Action

A process by which a court of law is engaged to pursue a legal remedy, often involving litigation.

Differing Standards

Variations in rules, regulations, or norms across different areas, organizations, or systems.

Bailments

involve the temporary transfer of possession of personal property from one party to another, under a contract, for a specific purpose.