An automotive insurance company has 25,000 policyholders. The accident rate is 0.07.
The number of accidents the company will have to pay out for is
. If the payout for each claim (after deductibles) is $8,000, the company’s total payouts will amount to $
. If the company wants to keep a profit margin of 8%, the premium it must charge is $
. The company can set aside a maximum amount of $
for this year’s investments.

Question

An automotive insurance company has 25,000 policyholders. The accident rate is 0.07.
The number of accidents the company will have to pay out for is 
. If the payout for each claim (after deductibles) is $8,000, the company’s total payouts will amount to $
. If the company wants to keep a profit margin of 8%, the premium it must charge is $
. The company can set aside a maximum amount of $
 for this year’s investments.

SmokeyBrown · Answer

Out of 25,000 policyholders, a 0.07 accident rate means that (25,000 * 0.07) accidents can be expected
The total payouts will be ($8,000 * total number of accidents)
To achieve a profit margin of 8%, the company must earn revenue 8% greater than the total payouts, equal to (total payouts * 1.08). The premium per customer will be (total revenue / 25,000), since there are 25,000 policyholders
The amount of money the company can set aside for this year's investments would depend on how much money they have as well as how much money they can afford to invest. As far as I can tell, this is not given in the above information