Using information from previous years,
the insurance companies can see the probability of a Car owner
making a claim for the current year. From this information, for
every 100 car drivers that a company insures, 12 of them are likely
to make a claim.
In the year 2000, the average cost
of each claim was £1,320. How much would you charge each
customer in order to cover the likely cost of the claims?
Results from just one year won't be
very accurate and insurers look at trends in the figures over
many years. Click here to see
how theory and experimental data can be different.