5. Losses for a line of insurance follow a Pareto distribution with 0 = 2000 and a = 2. An insurer sells policies that pay 100% of each loss up to $5000. The next year the insurer changes the policy terms so that it will pay 80% of each loss after applying a $100 deductible. The $5000 limit continues to apply to the original loss amount. That is, the insurer will pay 80% of the loss amount between $100 and $5000. Inflation will be 4%.
5. Losses for a line of insurance follow a Pareto distribution with 0 = 2000 and a = 2. An insurer sells policies that pay 100% of each loss up to $5000. The next year the insurer changes the policy terms so that it will pay 80% of each loss after applying a $100 deductible. The $5000 limit continues to apply to the original loss amount. That is, the insurer will pay 80% of the loss amount between $100 and $5000. Inflation will be 4%.
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Author:Amos Gilat
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Chapter1: Starting With Matlab
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![5. Losses for a line of insurance follow a
Pareto distribution with 0 = 2000 and a
= 2. An insurer sells policies that
100% of each loss up to $5000. The next
the insurer changes the policy terms
рay
year
so that it will pay 80% of each loss after
applying a $100 deductible. The $5000
limit continues to apply to the original
loss amount. That is, the insurer will pay
80% of the loss amount between $100
and $5000. Inflation will be 4%.
Calculate the decrease in the insurer's
expected payment per loss.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fecd428f8-432e-4d48-91ab-27a8ac58f31d%2F3bf99c68-10f5-4b2c-9281-27ca0f33e120%2Fld5wbtn_processed.png&w=3840&q=75)
Transcribed Image Text:5. Losses for a line of insurance follow a
Pareto distribution with 0 = 2000 and a
= 2. An insurer sells policies that
100% of each loss up to $5000. The next
the insurer changes the policy terms
рay
year
so that it will pay 80% of each loss after
applying a $100 deductible. The $5000
limit continues to apply to the original
loss amount. That is, the insurer will pay
80% of the loss amount between $100
and $5000. Inflation will be 4%.
Calculate the decrease in the insurer's
expected payment per loss.
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