insurance in LDA

[ajsa]

Hi David,

The insurance payment amount in LDA is I(P) * max(min(limit,x)-deductible, 0)*H. Could you explain what I(P) and H are?
is I(P) the probability that the insurer will not pay the full amount? But it sounds like if the insurer has high probability to pay full, I(P) will be low so the payment will be low?
Is H the remaining % after the "haircut" or expenses?

Thanks.