CAS Exam 8 Fall 2018, Question 6
Study guide: Exam 8
An actuary is comparing the output of two generalized linear models to develop a new rating plan for personal auto. Model statistics are shown below:
| Saturated Model | Model A | Model B | |
|---|---|---|---|
| Log-Likelihood | -1,000 | -1,500 | -1,465 |
| Estimated Dispersion Parameter | 1.75 | 1.75 | 1.75 |
- Model A is a nested model of Model B, where Model B has an additional variable for driver age.
- Driver age is fit using a second-order polynomial.
- The critical value to be used from the F-distribution is 19.5.
Part a (2 points)
Using two statistical tests, recommend whether or not driver age should be included in the rating plan.
Part b (0.5 points)
Describe why the deviance statistic alone should not be used to assess model fit.
Answer this question and see the worked solution