SOA Exam P Sample Question 98
Study guide: Exam P-1
An auto insurance company is implementing a new bonus system. In each month, if a policyholder does not have an accident, he or she will receive a cash-back bonus of 5 from the insurer.
Among the 1,000 policyholders of the auto insurance company, 400 are classified as low-risk drivers and 600 are classified as high-risk drivers. In each month, the probability of zero accidents for high-risk drivers is 0.80 and the probability of zero accidents for low-risk drivers is 0.90.
Calculate the expected bonus payment from the insurer to the 1000 policyholders in one year.
- A) 48,000
- B) 50,400
- C) 51,000
- D) 54,000
- E) 60,000
Answer this question and see the worked solution