In Insurance, What Is the Role of Compound Probability?
Compound probability plays a fundamental role in calculating insurance premiums, reserves and in defining corporate strategy. Compound probability is the probability that two independent events will occur simultaneously. It is the basis of probability distribution, which an actuary uses to evaluate insurable risks. In turn, risk estimations are used as guidelines when underwriters price policies and when corporate executive officers make decisions about new markets. Two events are considered to be independent if the outcome of one has no impact on the output of another. For instance, rolling a die twice results in two independent outcomes. Coming up with a five on the first roll does not make the second roll any more or less likely to be a three, for example. In insurance, many events are assumed to be independent, such as the paths of two separate hurricanes or the likelihood that two different subscribers will have a car accident. In order to calculate the compound probability of two
Related Questions
- I currently have a job and insurance for myself and my son, but after 3 months of my maternity leave if I decide to resign my job, will I be able to get FAMIS for myself and my two sons including my husband who has Obama care?
- I want to renew car insurance policy. So How can i get Premium, IDV and cashless facility?
- Focus on Coverage, Not Premium.
