An Insurance Company Decides on the Cost of a Policy

Multiple Choice

An insurance company decides on the cost of a policy for a natural hazard by:

A) adding up the total cost of the most recent disaster of the type.
B) multiplying the probability of the loss by the number of policies sold.
C) averaging their probable dollar loss for all disasters that they insure.
D) calculating the cost of the probable loss times the probability of that event.
E) multiplying the cost of the largest loss of that type times the number of times that loss has occurred.