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In: Statistics and Probability
An insurance company is reviewing its current policy rates. When originally setting the rates they believed...
An insurance company is reviewing its current policy rates. When originally setting the rates they believed that the average claim amount was $1800. They are concerned that the true mean is actually higher than this because they could potentially lose a lot of money. They randomly select 40 claims, and calculate a sample mean of $1950 and the sample standard deviation of claims is $500, test to see if the insurance company should be concerned. Use an α level of 0.01.[7 points]
Solutions
orchestra answered 2 years agoRelated Solutions
An insurance company is reviewing its current policy rates. When originally setting the rates they believed...
An insurance company is reviewing its current policy rates. When
originally setting the rates
they believed that the average claim amount was $1,800. They are
concerned that the true mean
does not equal this because they could potentially lose a lot of
money. They randomly select 40
claims, and calculate the sample mean of $1,950. Assuming that the
standard deviation of claims
follows a Normal distribution with known standard deviation $500,
perform a hypothesis testing
to see if the insurance...
An insurance company is reviewing its current policy rates. When originally setting the rates they believed...
An insurance company is reviewing its current policy rates. When
originally setting the rates they believed that the average claim
amount was $1,800. They are concerned that the true mean does not
equal this because they could potentially lose a lot of money. They
randomly select 40 claims, and calculate the sample mean of $1,950.
Assuming that the standard deviation of claims follows a Normal
distribution with known standard deviation $500, perform a
hypothesis testing to see if the insurance...
An insurance company is reviewing its current policy rates. When originally setting the rates they believed...
An insurance company is reviewing its current policy rates. When
originally setting the rates they believed that the average claim
amount was $1,800. They are concerned that the true mean is
actually higher than this, because they could potentially lose a
lot of money. They randomly select 40 claims, and calculate a
sample mean of $1,950. Assuming that the standard deviation of
claims is $500, and set α = .05, test to see
a. Write down the type of test...
An insurance company is reviewing its current policy rates. When originally setting the rates, they believed that the average claim amount was $1,500
An insurance company is reviewing its current policy rates. When
originally setting the rates, they believed that the average claim
amount was $1,500. They are concerned that the true mean is
actually higher than this, because they could potentially lose a
lot of money. The company is interested in making an inference
about the population mean as follows:Null hypothesis: the true mean is _____ higher
than $1,500.Alternative hypothesis: the true mean is _____
higher than $1,500.a.Actually, not actually.b.Not actually, actually.c.Neither...
An automotive insurance company is reviewing a customer's application for a one-year policy. Based on the...
An automotive insurance company is reviewing a customer's
application for a one-year policy. Based on the customer's driving
history and the insurance company's past experience, the company
assumes that the probability of each payout for one year is as
shown in the table provided. What is the expected payout for the
insurance company?
Payout
Probability
$100,000
0.002
$50,000
0.005
$25,000
0.012
$10,000
0.026
$5,000
0.065
$0
0.89
An automobile insurance company is in the process of reviewing its policies. The company is considering...
An automobile insurance company is in the process of reviewing
its policies. The company is considering increasing the premium
charged to drivers under 25. According to company records, 35
percent of the insured drivers are under the age of 25. Company
records also show that 280 of the 700 insured drivers under the age
of 25 have been involved in at least one automobile accident. On
the other hand, only 130 of the 1300 insured drivers 25 years or
older...
In setting its rates, the Smidlap Insurance Co. used a 60% loss ratio. Smidlap’s actual loss...
In setting its rates,
the Smidlap Insurance Co. used a 60% loss ratio. Smidlap’s actual
loss ratio, however, was 75%. If Smidlap uses the loss ratio
ratemaking method to revise its insurance rate, Smidlap would:
Select one:
a. Increase its rate by 10 percent.
b. Increase its rate by 25 percent.
c. Keep its rate the same.
d. Decrease its rate by 25 percent.
An insurance company is offering a new policy to its customers.Typically the policy is bought...
An insurance company is offering a new policy to its customers.
Typically the policy is bought by a parent or grandparent for a
child at the child’s birth. For this policy, the purchaser, say,
the parent, makes the following six payments to the insurance
company: First birthday $ 800 Second birthday $ 800 Third birthday
$ 900 Fourth birthday $ 850 Fifth birthday $ 1,000 Sixth birthday $
950 After the child’s sixth birthday, no more payments are made.
When...
An insurance company is offering a new policy to its customers.Typically the policy is bought...
An insurance company is offering a new policy to its customers. Typically the policy is bought by a parent or a grandparent for a child at the child's birth. The details of the policy are as follows: The purchaser(say, the parent) makes the following six payments to the insurance company:
First birthday: $400
Second birthday: $500
Third birthday: $600
Fourth birthday: $700
Fifth birthday: $800
Sixth birthday: $900
After the child's sixth birthday, no more payments are made. When the...
An insurance company states in its automobile insurance policy that in case of an accident, it...
An insurance company states in its automobile insurance policy
that in case of an accident, it uses the formula P = (x - x^4/5)
(y-18 / 50) to determine how much to reimburse a
policyholder, where x is the value of the car at the time of the
accident and y is the age of the person driving. The policyholder
must sign a document indicating agreement with this procedure for
determining reimbursement amounts. Joe, a 70 year old policyholder,
was driving...
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