An Automobile Insurance Company Estimates the Following Loss Probabilities for the Nextyear

question 236

Essay

An automobile insurance company estimates the following loss probabilities for the nextyear on a $25,000 sports car:
$$\begin{array} { l l } \text { Total loss: } & 0.001 \\50 \% \text { loss: } & 0.01 \\25 \% \text { loss: } & 0.05 \\10 \% \text { loss: } & 0.10 \\\text { No loss: } & 0.839\end{array}$$ Assuming the company will sell only a $500 deductible policy for this model (i.e., the owner covers the first $500 damage), how much annual premium should the company charge in order to average $565 profit per policy sold?

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Definitions:

Observed Performance

The evaluation of an employee's work activities through direct observation to assess their efficiency, effectiveness, and adherence to procedures.

Training Needs

The identification of gaps in skills or knowledge that require training to improve employee performance and productivity.

Cross-Train

The process of teaching an employee who was hired to perform one job function the skills required to perform other job functions.

Employee Mix

The composition of a workforce in terms of the variety of employees, including their skills, experiences, and backgrounds.