Losses follows a lognormal distribution with u=6.9078 sigma=2.6283.
A policy covers losses subject to a 1000 franchise deductible and
a 100,000 policy limit.
Determine the average payment per paid claim.
....................................................................
The solution in book is as below.
E(X ^ 100,000)-E(X ^ 1000)=9364
Averag per claim=9364/(1-F(1000))
For a franchise deductible, each paid claim get 1000 more.
The answer is 19,728.
.....................................................................
My problem is why not use E(X ^ 101,000)-E(X ^ 1000)
I think there is a 100,000 policy limit,but not a maximum cover loss.
If it says there is a maximum cover loss,the solution in book will be right.
Can anyone tell me what's wrong with my solution?
Thank you very much.
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A policy covers losses subject to a 1000 franchise deductible and
a 100,000 policy limit.
Determine the average payment per paid claim.
....................................................................
The solution in book is as below.
E(X ^ 100,000)-E(X ^ 1000)=9364
Averag per claim=9364/(1-F(1000))
For a franchise deductible, each paid claim get 1000 more.
The answer is 19,728.
.....................................................................
My problem is why not use E(X ^ 101,000)-E(X ^ 1000)
I think there is a 100,000 policy limit,but not a maximum cover loss.
If it says there is a maximum cover loss,the solution in book will be right.
Can anyone tell me what's wrong with my solution?
Thank you very much.
--
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