Question 3
(The following is a purely imaginary scenario)
An insurance company believes that people can be divided into two classes: “Class-1: Those who are accident prone” and “Class-2: Those who are not accident prone”. The company’s statistics show that an accident-prone person will have an accident at sometime within a fixed 1-year period with probability 0.4, whereas this probability decreases to 0.2 for a person who is not accident prone. It is assumed that 30 percent of the human population is accident prone. Given this information, answer the sub-questions.
What is the probability that a new policyholder will have an accident within a year of purchasing a policy? (Note: Enter the answer rounded to two decimal places. For example, if the answer is “1.235”, then enter it as “1.24”)