Probability that a health policy
become a claim policy is equal to 0.3 if age of the policy holder is more than
50 years otherwise it is 0.2. This policy is designed for a particular lifestyle
people where 20% of the persons are above 50 years of age.
Claim amount distribution is
linear varying between Rs. 1000 to Rs. 25000 with 0.5 probability, between Rs.
25000 to Rs. 100000 with 0.3 probability and between Rs. 100000 to Rs. 150000
with 0.2 probability.
10% of the premium collected is
accounted for administrative cost.
Simulate this for 1000 policies
taking premium as Rs. 6000 per policy. Experiment by changing the claim
distribution pattern and other variables in this model.
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