CAS Exam 5 Spring 2013, Question 12
Study guide: Exam 5
An insurer is planning to revise burglar alarm and deductible rating plan factors for its Homeowners program. Given the following generalized linear model output:
Burglar Alarm:
| Burglar Alarm | GLM Prediction | -2 Standard Errors | +2 Standard Errors | Policies |
|---|---|---|---|---|
| None | 1.00 | — | — | 320,000 |
| Local Alarm | 0.98 | 0.950 | 1.010 | 27,500 |
| Central Reporting | 0.86 | 0.730 | 0.990 | 2,500 |
Deductible Amount:
| Deductible | GLM Prediction | -2 Standard Errors | +2 Standard Errors | Policies |
|---|---|---|---|---|
| $250 | 1.75 | 1.60 | 1.90 | 2,700 |
| $500 | 1.10 | 1.05 | 1.15 | 87,000 |
| $1,000 | 1.00 | — | — | 150,000 |
| $2,500 | 0.95 | 0.90 | 1.00 | 60,000 |
| $5,000 | 0.85 | 0.80 | 0.90 | 50,100 |
| $7,500 | 1.25 | 0.90 | 1.60 | 150 |
| $10,000 | 0.40 | 0.00 | 0.80 | 50 |
Propose revised burglar alarm and deductible rating plan factors. Document the relevant analysis and rationale to support the proposal.
Part a (3 points)
Answer this question and see the worked solution