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Two different models of diesel engines are found to have a 10-year chance of loss of 5%. How could the objective risk be different between these two models 1. 6. A local insurance company is considering a cat health insurance product. Based on their research the chance of a claim is 1.37% per month with an average claim of $4,700. Ignore the time value of money a. What is the "fair price"premium for this insurance on a per month basis? b. Should they charge more than or less than the monthly amount in part a.? Why?
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