The Employees of General Manufacturing Corp

question 4

Essay

The employees of General Manufacturing Corp.receive health insurance through a group plan issued by Wellnet.During the past year,40 percent of the employees did not file any health insurance claims,40 percent filed only a small claim,and 20 percent filed a large claim.The small claims were spread uniformly between 0 and $2,000,whereas the large claims were spread uniformly between $2,000 and $20,000.Based on this experience,Wellnet now is negotiating the corporation's premium payment per employee for the upcoming year.You are an operations research analyst for the insurance carrier,and you have been assigned the task of estimating the average cost of insurance coverage for the corporation's employees.(a)Use the random numbers 0.4071,0.5228,0.8185,0.5802,and 0.0193 to simulate whether each of five employees files no claim,a small claim,or a large claim.Then use the random numbers 0.9823,0.0188,0.8771,0.9872,and 0.4129 to simulate the size of the claim (including zero if no claim was file d).Calculate the average of these claims to estimate the mean of the overall distribution of the size of employee's health insurance claims.(b)Formulate and apply a spreadsheet model to simulate the cost for 300 employees' health insurance claims.Calculate the average of these random observations.(c)The true mean of the overall probability distribution of the size of an employee's health insurance claim is $2,600.Compare the estimates of this mean obtained in parts a and b with the true mean of the distribution.

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Definitions:

Agency Authority

The power granted to an agent to act on behalf of a principal in business transactions.

Singapore

A sovereign city-state and island country in Southeast Asia, known for its strong economy, strict regulations, and as a global financial hub.

Transactions

Financial or physical activities involving the exchange of goods, services, or funds between parties.

Scope of Employment

The range of actions and activities an employee is expected to perform as part of their job.