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What Are the Expected Annual Savings from a Lock-Box System

question 53

Multiple Choice

What are the expected annual savings from a lock-box system that collects 150 cheques per day averaging $500 each, and reduces mailing and processing times by 2.5 and 1.5 days respectively, if the annual interest rate is 7 percent?


Definitions:

Premium Rate

The cost of an insurance policy per unit of coverage, reflecting the likelihood of a claim being made.

Coinsurance Clause

A provision in insurance policies that requires the policyholder to bear a portion of the costs of a claim, with the insurance company paying the remainder.

Coinsurance Clause

A provision in an insurance policy that defines the percentage of the claim amount to be shared between the insurer and the insured.

Short-rate Refund

A return of a portion of the premium on an insurance policy that is canceled by the policyholder before its expiration, calculated at less than a pro-rata basis.

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