An insurance company provides annual cover to small businesses that own specialist surveying equipment. The policy covers theft or accidental damage. The company expects the following outcomes for the coming year.
| Information | Expected value |
|---|---|
| Annual policies sold | 2,000 |
| Premium per policy | £600 |
| Successful claims | 12 |
| Average payment per successful claim | £50,000 |
Calculate the total annual premium income the insurance company expects to collect.
Using the data, explain how risk pooling operates for this insurance company and how the cover may affect investment by the small businesses.
82 exam-style questions on OCR GCSE Economics 2.8 The role of money and financial markets, covering 2.8.1 Money as a medium of exchange, 2.8.2 Role of the financial sector, 2.8.3 Importance of the financial sector, 2.8.4 Interest rates and saving, borrowing, investment, and 2.8.5 Effect of interest rate changes. Each one has a worked solution and a mark scheme showing where the marks go.