2.
Sodexo Property purchases a liability insurance policy due to the loss uncertainty of
Sodexo wealth in two of their assembly units as below:
Assembly
Branch
Johor Bahru
Pahang
Wealth
Probability of
Possible loss
RM40,000
loss
0.08
RM17,500
Tutorial Chapter 5.docx
RM85,000
0.20
RM24,000
The insurance policy provides both defense and damages if the employees or
company's products or services cause or are alleged to have caused Bodily Injury or
Property Damage. The insurance policy is taken as follows:
Policy
Premium
Coverage
Insurance
Insurance
Insurance
Safeco
Conseco
Symetra
RM1,500
RM2,000
RM2,600
RM15,000
RM20,000
RM24,000
Based on the information above, Calculate the expected wealth of each insurance policy
for the assembly units.
JB
Safeco
No Loss (0.92)
Loss (0.08)
RM40,000 - RM1,500 = 38,500
RM40,000 - RM1,500 - RM17,500 + RM15,000 = 36,000
Expected wealth = (38,500 \times 0.92) + (36,000 \times 0.08) = 38,300
