Question

Insurance companies track life expectancy information to assist in determining the cost of life insurance policies. Last year the average life expectancy of all policyholders was 77 years. ABI Insurance wants to determine if their clients now have a longer life​ expectancy, on​ average, so they randomly sample some of their recently paid policies. The insurance company will only change their premium structure if there is evidence that people who buy their policies are living longer than before. Which of the following statement is TRUE about this hypothesis​ test?

A. It is a one tailed test about a proportion.

B. It is a two tailed test about a mean.

C. It is a two tailed test about a proportion.

D. It is a one tailed test about a mean.

E. None of the above

Answer 1

since the insurance companies notice that Last year the average life expectancy of all policyholders was 77 years.

then ABI Insurance wants to determine if their clients now have a longer life​ expectancy, on​ average, so they randomly sample some of their recently paid policies.

then The insurance company will only change their premium structure if there is evidence that people who buy their policies are living longer than before.

and now they claim that people who buy their policies are living longer than before.

In that case the null hypothesis and alternative hypothesis are:

H0:

H1: ( one tailed)

so the correct option is

It is a one tailed test about a mean.