# W9Tute 1001 - Examples Consider an NCD scheme with three...

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Examples Consider an NCD scheme with three levels of premium discount: 0%, 25% and 50%. The undiscounted premium is \$9000. If a policyholder makes no claims during the year, he/she moves up one level (or stays at the highest level). Otherwise, if a claim is made, he/she moves down a level (or stays at the lowest level). A policyholder only makes a claim if they have an accident that leads to a loss of more than \$50. A policyholder will have at most one accident per year, with probability 1 2 e 0 . 25 . Given that an accident occurs, the loss is exponentially distributed with mean \$200. 1. Determine the transition matrix for this scheme. 2. What is the probability that a new policyholder is in the 50% class in 2 years’ time? 3. Determine the long-run proportions within each level of the NCD scheme and hence the average premium paid by a policyholder in the long run. UNSW Week 9 ACTL1001 Tutorial

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Examples Transition Matrix Given that a loss occurs, the probability that the loss is greater
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## This note was uploaded on 06/12/2011 for the course ASB 1001,2522, taught by Professor Nicole during the One '09 term at University of New South Wales.

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W9Tute 1001 - Examples Consider an NCD scheme with three...

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