Finance 431Medical Malpractice Class ProjectNames:________________________________________________Form into groups of 2 students. Try to work with someone you haven’t worked with before. For questions 1 - 4, assume the following: - Step Factors of 30%, 55%, 70%, 85%, 95% - Tail Charge of 2.0 x Expiring Mature CM premium - You are at a Mature CM level at the 5th year into a CM program - Annual premium trend of 10% - Occurrence Premium in 2008 of $10,0001. If a doctor graduates medical school in 2008, begins practicing medicine in that year, and wants to buy CM coverage from The Doctors Company what would he/she pay in total for coverage in the first 5 years of practice?(.3x10,000) + (.55x10,000x1.1) + (.7x10,000x1.1^2) + (.85x10,000x1.1^3) + (.95x10000x1.1^4) = 42,7422. If the same doctor chose to buy occurrence coverage what would he/she pay in total for coverage in the first 5 years of practice?10,000 + 10,000x1.1 + 10,000x1.1^2 + 10,000x1.1^3 + 10,000x1.1^4 = 61,0513. Suppose the same doctor bought five years of CM coverage from The Doctors Company and then decided to switch to Medical Liability Mutual Insurance Company on a first year CM basis, would the doctor need to buy a Tail policy? If so, what would the charge be?Yes. (2 x .95 x 10,000 x 1.1^4) = 27,8184. Suppose the same doctor bought five years of occurrence coverage from The Doctors Company and then decided to switch to Medical Liability Mutual Insurance Company on a first year CM basis, would the doctor need to buy a Tail policy? If so, what would the charge be?NoUse the following claims log to answer the following questions.Claim # Occ. Date Rept. Date1 1/1/01 7/1/042 7/1/02 8/1/073 3/1/03 8/1/044 4/1/03 5/1/035 7/1/06 7/1/076 7/1/06 12/1/097 1/1/07 12/1/098 1/1/07 7/1/079 12/31/07 1/1/08What claims are covered by the following policies:a. Occurrence Policy covering from 1/1/06 – 12/31/06 5 and 6b. CM Policy covering from 1/1/07 – 12/31/07 with a retroactive date of 1/1/035 and 8c. 1st Year CM Policy effective from 1/1/03 – 12/31/034d. Tail Policy purchased 1/1/07 for a doctor retiring from practice who had been purchasing CM coverage from 1/1/02 – 12/31/06 2, 5 and
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