A home insurance company anticipates the following pattern of claims, based on h
ID: 2742368 • Letter: A
Question
A home insurance company anticipates the following pattern of claims, based on historical data. What is the standard deviation of claims?
Type of Claim
Size of Claim
Number of Claims out of 10,000 Policy Holders
Probability
1
$200,000
1
0.0001
2
$50,000
10
0.001
3
$2,000
200
0.02
4
$0
9,789
0.9789
A) $2,562.79 B) $6,567,900 C) $2,000
D) $110
E) $3,753.52
Type of Claim
Size of Claim
Number of Claims out of 10,000 Policy Holders
Probability
1
$200,000
1
0.0001
2
$50,000
10
0.001
3
$2,000
200
0.02
4
$0
9,789
0.9789
Explanation / Answer
Solution.
D) $110
Type of Claim Size of Claim Number of Claims out of 10,000 Policy Holders Probability 1 200,000.00 1 0.0001 20.00 2 50,000.00 10 0.001 50.00 3 2,000.00 200 0.02 40.00 4 - 9,789 0.9789 - Standard deviation 110.00