CAS Exam 8 Fall 2015, Question 4
Study guide: Exam 8
An actuary is reviewing an account that has been with the company for over ten years.
Given the following:
- The claim frequency for this account follows a Poisson distribution, with
\lambda = 0.012 - The recorded frequency for the last five years is as follows:
| Year | Exposures | Frequency |
|---|---|---|
| 2010 | 9,500 | 0.011 |
| 2011 | 11,000 | 0.010 |
| 2012 | 13,000 | 0.013 |
| 2013 | 10,500 | 0.012 |
| 2014 | 12,000 | 0.010 |
- The critical value for the relevant Chi-squared distribution is 9.49
Part a (1.5 points)
Use the Chi-squared test to evaluate whether the claim frequency is shifting over time. Include the hypotheses, test statistic, and provide an interpretation of the result.
Part b (0.75 points)
Fully describe another method for determining whether claim frequency is shifting over time.
Answer this question and see the worked solution