CAS Exam 8 Fall 2016, Question 2

Study guide: Exam 8

Part a (0.5 points)

Describe the purpose of clustering as it pertains to risk classification.

Part b (0.5 points)

Briefly contrast hierarchical and non-hierarchical clustering methods.

Part c (1 point)

An insurer wants to increase the number of groupings for a particular class within their classification plan. According to the American Academy of Actuaries "Risk Classification Statement of Principles," describe two considerations in using a hierarchical or non-hierarchical clustering method to determine the groupings.

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Concepts tested

• Clustering
• Hierarchical Clustering
• Homogeneity
• Credibility
• Classification Ratemaking

More questions from this set

• CAS Exam 8 Fall 2016, Question 1
• CAS Exam 8 Fall 2016, Question 3