A health insurance product is designed targeting people with certain lifestyle. The premium charged is Rs. 5000 per policy. Considering the types of coverage in the policy, the probability that a policy will become a claim policy is estimated to be 0.2. The Insurance Company offering the cover has collected the data related to treatment expenses of various diseases covered under the scheme. Based on this, the claim amount is likely to vary linearly between Rs. 10000 to Rs. 50000.
The company keeps 20% of the premium amount collected for meeting overhead and other expenses and only 80% is available for claim settlement.
The Insurance Company wants to do such business only if the probability of loss is less than or equal to 20%.
The probability of loss in the present case is quite high (over 90%). Recommend measures to reduce the probability of loss below 20%.
Make 4 sets of Simulation run of length 1000 for each of your recommendations and present the result in summarized form.
Last date for submission: 29th December 2012.
2 comments:
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