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An automobile insurance company sells an insurance policy with an annual premium of $444. Based on claims data from the last decade, the company has calculated that 4% of the policy holders claim $2,000, 12% claim $1,200, and 20% claim $600. Will the company make money?

Respuesta :

Answer:

Yes, they will make a profit

Step-by-step explanation:

Here, we want to calculate if the insurance company will make money

The insurance company will make money if the amount at which it sells the policy is greater than the amount of claims made.

The average amount of claims is as follows;

(4% of 2000) + (12% of 1,200) + (20% of 600)

= 80 + 144 + 120 = $344

So the profit made by the company will be $444- $344 = $100

The insurance company will make a profit

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