What is the expected value of claims per policy

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An insurance company calculates that the probability that in a year a motor insurance policyholder makes a claim arising from a major accident is 0.03, the probability that s/he makes a claim as a result of a minor accident is 0.1, and the probability that s/he makes a claim as a result of vehicle theft is 0.05. The typical payment for a major accident claim is £4500, for a minor accident claim is £800, and for theft £4000. The probability that a policyholder makes more than one claim in a year is zero. What is the expected value of claims per policy?

Reference no: EM131404546

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