Question
2000 factories require a Sum Insured of Rs.10 crores
each. Statistically, we know that 2 factories get destroyed by fire each year. However, we do not know which two . So, if the losses are to be paid for by all of the 2000 factory owners, what should be the contribution by each factory owner by way of pure premium?Solution
Total annual loss: Rs. 10 crores * 2 factories = Rs. 20 crores Contribution per factory: Rs. 20 crores / 2000 factories = Rs. 10,000 Therefore, the contribution by each factory owner by way of pure premium is Rs. 10,000. Â
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