Example: Again considering the 100 car owners, if the insurer will pay for all of the accidentrelated car repair losses, the insurer should collect a premium of at least 75,000 because that is the expected amount of claim payments to policyholders.
The net premium or benefit premium would amount to 750 per policy.
The insurer might charge the policyholders an additional 30% so that there would be 22,500 to help the insurer pay expenses related to the insurance policiesand cover any unanticipated claim payments.
In this case 750θ130%=975 would be the gross premium for a policy.