Gce Model Questions Vol1 2020 Commerce Question 40
Practice objective / multiple choice question 40 from the 2020 Gce Model Questions Vol1 Commerce examination.
An insurer offers a fire‑insurance policy with a sum insured of \(\text{₦}2,000,000\). Historical data show that the probability of a fire claim in a year is 0.004 and that the average claim amount, when a fire occurs, is 60 % of the sum insured. The insurer adds a loading of 30 % to cover administrative expenses and a profit loading of 15 % on the pure premium. (a) Calculate the annual gross premium that should be charged. (b) If the insurer wishes to give a 5 % discount on the premium to businesses that install fire‑suppression systems, what is the discounted premium and what is the effective total loading (as a percentage of the pure premium) after the discount?
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About This Question
This is Gce Model Questions Vol1 2020 Commerce Question 40. It is one of the objective questions from the 2020 Gce Model Questions Vol1 Commerce examination.
Difficulty level: Medium .
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