Question

The employees of a company are covered by group life insurance which pays a specified benefit amount if an employee dies. There are two types of employee, and the life insurance benefits differ by employee type.

For junior employees, the benefit amount is $20,000, and the probability of dying during a year is 0.012. There are 250 junior employees.

For senior employees, the benefit amount is $50,000, and the probability of dying during a year is 0.008. There are 1,250 senior employees.

The aggregate claims payable during the year are assumed to conform to the individual risk model.

Calculate the probability that the aggregate claims payable in a given year will exceed $900,000, using a normal approximation.

Answer 1