What is the insurer's expected gain on one policy?

Explanation

1. 01

   The insurer keeps ₹2,000 with probability 0.995 and loses $1{,}00{,}000 - 2{,}000 = 98{,}000$ with probability 0.005.

2. 02

   $2{,}000(0.995) - 98{,}000(0.005) = 1{,}990 - 490 = 1{,}500$ rupees.