Part5: Insurance To Value, Anderson

[Graduate]

I don't get the concept of CAR(Coinsurance Apportionment ratio) i-e given a particular CAR, how the insurer and the insured pays a particular loss.

Page12 of Text, Illustration1, 4th paragraph:
"Blanca's CAR=0.5, She would coinsure half of every partial loss below F and a portion of every partial loss beyond F upto C (which is equal to V in this case). For a loss of 200K, Blanca will be indemnified 100K and suffer a coinsurance penalty of 100K"

My question is:
How the Blanca's indemnity and coinsurance penalties will be for losses of:
1)275K
2)375K
3)475K

I'm mainly asking the above questions to understand the working of CAR.

Thanks alot for putting your time into it.

[cranberry]

I ended up doing a short excel spreadsheet. That way you can run a lot of senarios and see the patterns - I even graphed it "for fun."

I'd recommend this technic for you. It really helps. Start with the simpler stuff on 4 to 7 where there are examples.

-This is what I got. As it's messy, I'd recommend copy/pasting it back into excel so you can actually read it. (text-to-columns, space delimited)

Value_of_Prop Face_V_of_Ins $_of_Loss Coins_% Conins_$ Coins_Def Coins_App Coin_Penalty Indemnity_Pymt Paid_by_Insured
V F L c C d a e I no_abbrev
500,000 250,000 100,000 100% 500,000 250,000 50% 50,000 50,000 50,000
500,000 250,000 200,000 100% 500,000 250,000 50% 100,000 100,000 100,000
500,000 250,000 275,000 100% 500,000 250,000 50% 112,500 137,500 137,500
500,000 250,000 375,000 100% 500,000 250,000 50% 62,500 187,500 187,500
500,000 250,000 475,000 100% 500,000 250,000 50% 12,500 237,500 237,500