Gce Model Questions Vol1 2022 Commerce Question 10

Beta Insurance Co. provides a comprehensive motor insurance policy for private cars. The annual premium is calculated using the formula: Premium = Base Rate × (1 + Risk Factor) + Administrative Charge. The Base Rate is ₦12,000 for a standard car. The Risk Factor depends on the driver’s age and claim history: drivers aged 25–35 have a risk factor of 0.20; each previous claim in the last 3 years adds 0.10 to the risk factor. The Administrative Charge is a fixed ₦2,500. A customer, Mr Okoro, aged 30, has had two claims in the past three years. He wishes to insure a car valued at ₦2,500,000. The policy includes a “no‑claim bonus” (NCB) of 5% of the premium for each claim‑free year, up to a maximum of 25%. The insurer also offers a term life insurance policy with a sum assured of ₦5,000,000, payable on death. The annual premium for the life policy is calculated using the equivalence principle: Premium = (Sum Assured × Mortality Rate) / (1 – Mortality Rate) + Loading of 15% of the net premium. The mortality rate for a 30‑year‑old male is 0.0012.