Insurance question involving net premium
An insurance company sells a one-year automobile policy with a deductible of two. The probability that the insured will incur a loss is 0.05. If there is a loss, the probability of a loss amount 𝑁 is 𝐾⁄𝑁 for 𝑁 = 1, 2, 3, 4, 5 and some constant 𝐾. These are the only possible loss amounts and no more than one loss can occur. Determine the net premium for this policy.
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