Policy Modifications (SOA Exam P – Probability – Univariate Random Variables)

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After completing this video you should be able to:

Apply the concepts of deductibles, coinsurance, benefit limits, and inflation to convert a given loss amount from a policyholder into the corresponding payment amount for an insurance company.

Example 1:
An insurance policy has a ground-up loss, 𝑋, given in the table below and a deductible of 𝑑=50.

Example 2:
An insurance policy has a loss random variable, 𝑋, given in the table below. A coinsurance factor of 𝛼=0.9 is imposed on the policy.

Example 3:
Losses during the 2023 calendar year follow an exponential distribution with a mean of 1000. Losses during the 2024 calendar year increase over losses during the 2023 calendar year by a 5% inflation rate. Determine the probability that losses during the 2024 calendar year exceed 1500.