Question

In: Statistics and Probability

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:

  1. 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 A or B.

Solutions

Expert Solution

Option B is correct.

Null Hypothesis

Alternate Hypothesis   

* In Hypothesis Testing we make a tentative assumption about population parameter. This assumption expressed as statement is called Null Hypothesis (H0).

* We then define an opposite statement called Alternate Hypothesis(Ha).

orchestra answered 2 years ago
Next > < Previous

Related 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 $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...
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 sells an insurance policy for $1000. If there is no claim on a...
An insurance company sells an insurance policy for $1000. If there is no claim on a policy, the company makes a profit of $1000. If there is a claim on a policy, theȱȱcompany faces a large loss onȱȱthat policy. The expected value to the company, per policy, is $250. Which of the following statements is (are) true? A: The most likely outcome on any single policy is a profit for the company of $250. B: If the company sells only...
An insurance company reports the following distribution of the claim sizes for an auto insurance policy...
An insurance company reports the following distribution of the claim sizes for an auto insurance policy from a sample of 87 cases. Claim Size (in $) Number of claims 2000 to 3000    15 3000 to 4000 10 4000 to 5000    20 5000 to 6000 15 6000 to 7000 10 7000 to 8000    10 8000 to 9000    7 ( a ) Construct a histogram for the data. ( b ) a frequency polygon for the data. (...
Suppose the national average dollar amount for an automobile insurance claim is $565.412. You work for...
Suppose the national average dollar amount for an automobile insurance claim is $565.412. You work for an agency in Michigan and you are interested in whether or not the state average is less than the national average. The hypotheses for this scenario are as follows: Null Hypothesis: μ ≥ 565.412, Alternative Hypothesis: μ < 565.412. A random sample of 46 claims shows an average amount of $582.985 with a standard deviation of $91.4882. What is the test statistic and p-value...
Suppose the national average dollar amount for an automobile insurance claim is $890.34. You work for...
Suppose the national average dollar amount for an automobile insurance claim is $890.34. You work for an agency in Michigan and you are interested in whether or not the state average is greater than the national average. The hypotheses for this scenario are as follows: Null Hypothesis: μ ≤ 890.34, Alternative Hypothesis: μ > 890.34. You take a random sample of claims and calculate a p-value of 0.2844 based on the data, what is the appropriate conclusion? Conclude at the...
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...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT