CAS Exam 8 Fall 2016, Question 5
Study guide: Exam 8
A GLM has been used to develop an insurance rating plan. The results are given below:
| Risk | Model Predicted Loss | Actual Loss |
|---|---|---|
| 1 | 2,000 | 2,050 |
| 2 | 500 | 220 |
| 3 | 1,500 | 1,480 |
| 4 | 800 | 850 |
| 5 | 200 | 400 |
Part a (1.75 points)
Plot the Lorenz curve for this rating plan. Label each axis and the coordinates of each point on the curve.
Part b (0.5 points)
Briefly describe how the Gini index is calculated and what the Gini index measures when applied to an insurance rating program. Do not calculate the Gini index.
Answer this question and see the worked solution