Question

If the insurance company needs to bring in $500,000 a year to stay in business, how many policies do they need to sell?

Answer 1

The insurance company needs to sell approximately 269 policies to bring in $500,000 a year.

Step-by-step explanation:

To determine how many policies the insurance company needs to sell, we can use the given information. If each of the 100 drivers pays a $1,860 premium each year, the insurance company will collect a total of $186,000. This amount covers the costs of the accidents that occur. To calculate how many policies they need to sell to bring in $500,000 a year, we can use the formula:

Number of policies = Target revenue / Average premium

Number of policies = $500,000 / $1,860

Number of policies = 268.82

Therefore, the insurance company needs to sell approximately 269 policies to bring in $500,000 a year.