A Black and White View on Insurance
Source:
March 15, 2010
probability
Problem Statement
An insurance company believes that people can be divided into 2 classes: those who are accident prone and those who are not. Their statistics show that an accident prone person will have an accident in a yearly period with probability 0.4, whereas this probability is 0.2 for the other kind. Given that 30% of people are accident prone, what is the probability that a new policyholder will have an accident within a year of purchasing a policy?