CAS Exam 8 Fall 2012, Question 2
Study guide: Exam 8
A private passenger auto insurance company orders a report whenever it writes a policy, showing what other insurance the policyholder has purchased. The following table shows claim frequencies (per 100 earned car-years) for bodily injury liability coverage, split by whether the policyholder has a homeowners policy and whether the policyholder had a prior auto policy:
| Prior Auto Policy | Homeowners Policy: Yes | Homeowners Policy: No |
|---|---|---|
| Yes | 3 | 5 |
| No | 8 | 12 |
The table does not include the experience of policyholders with missing data.
Part a (1.25 points)
Specify the following structural components of a generalized linear model that estimates frequencies for this book of business.
- i. Error distribution
- ii. Link function
- iii. Vector of responses
- iv. Vector of model parameters
- v. Design matrix
Part b (1 point)
Describe how the missing data may cause problems for the company in developing the model, and suggest a solution.
Answer this question and see the worked solution