9598 /www/nrich/html/content/id/9598/ 1 0000-00-00T00:00:00 <?xml version="1.0" encoding="UTF-8"?> <mdoxml version="1.0"><div class="framework"><font color="#996600">"Wow, great new phone!  How much did that set you back?"</font><br></br> "Don&#39;t ask - mega bucks!  Do you know what it can do ..."<br></br> <br></br> <em>1 month later ...</em><br></br> <br></br> <font color="#996600">"I&#39;ve just got a new phone!  Bet yours can&#39;t do what mine can!"</font><br></br> "I haven&#39;t got mine any more.  I lost it ... actually, I think it got stolen."<br></br> <font color="#996600">"But you had insurance, didn&#39;t you?"</font><br></br> "No, I didn&#39;t think it was worth it."<br></br> <font color="#996600">"Mine&#39;s insured - I wouldn&#39;t want to lose it!"</font><br></br> "But how much did that set you back?"<br></br> <font color="#996600">"Enough, but at least I don&#39;t have to worry about losing my phone!"</font><br></br> <br></br> <em>Who&#39;s right?  What are the issues?</em></div> <p><br></br> Tom&#39;s new phone cost him £500.  He didn&#39;t insure it.  <br></br> Alice&#39;s new phone cost her £500 also.  She did insure it, at an additional cost of £75.<br></br> <br></br> Investigate the consequences for Tom and Alice if:</p> <ul> <li>there is a 10% chance of losing their phone (by any means)</li> <li>taking out insurance means that the phone is replaced on a like for like basis, whatever the cause of the loss</li> </ul> What would you do?<br></br> <br></br> Do a survey around the class - how many people would insure, how many wouldn&#39;t?<br></br> What difference would it make if the probability of losing the phone is greater or smaller?<br></br> <br></br> What are the consequences for the insurance company if: <ul> <li>the chance a person loses their phone is 10% - that means that they can expect 1 in 10 people to lose their phones</li> <li>the phone is replaced on a like for like basis</li> <li>20% of people take out insurance</li> </ul> What difference does it make if the 10% risk of losing a phone is 1% or 25%?<br></br> What difference does it make if the 50% of people taking out insurance is 10% or 75%?<br></br> See if you can find break-even points for the company.  <br></br> You may find it helpful to consider a population of, say, 10,000.<br></br> <br></br></mdoxml> 5 3 0 0 0 1 0 Should you insure your mobile phone? It rather depends on whether you focus on the long-term pay-off or the effect of a single event. jag55 work in progress jag55 Probability - modelling approach