3) You are given the following table: A.. Use the information in the table to fi

Q: 3) You are given the following table: A.. Use the information in the table to fi

a) 1.Average severity per claim =Total amount of loss/Number of losses =390,000/315 = 1238.0952 2) Probability distribution Range of Loss amount Total amount of loss Probability $1-2000 $300,000 = 300/390 = 0.76923 $2000-10000 $90,000 = 1-0.76923 = 0.23076 Greater than $12,000 0 0 Range of Loss amount Total amount of loss Probability $1-2000 $300,000 = 300/390 = 0.76923 $2000-10000 $90,000 = 1-0.76923 = 0.23076 Greater than $12,000 0 0

ID: 3040251 • Letter: 3

Question

3) You are given the following table:

A.. Use the information in the table to find the average severity per claim

b. Use the information in the table to estimate a probability distribution for the loss severity per claim.

c. Using your answers from question 3, part (a) and question 2, part( b), use convolution to find the average loss.

Range of Loss Amt Midpoint Dollar amt of loss Number of losses Total $ Amt. of losses $1-2000 $1,000 300 $300,000 $2001-10,000 $6,000 15 $90,000 Greater than $10,000 NA 0 0

Explanation / Answer

1.Average severity per claim

=Total amount of loss/Number of losses

=390,000/315

= 1238.0952

Probability distribution

Range of Loss amount

Total amount of loss

Probability

$1-2000

$300,000

= 300/390 = 0.76923

$2000-10000

$90,000

= 1-0.76923 = 0.23076

Greater than $12,000