Exam 8 Practice Question 1
Study guide: Exam 8
A commercial property frequency GLM includes occupancy class. One occupancy class has only 35 policies. On the full modelling data its relativity is 2.40, with a p-value below 0.01. The record with the largest Cook's distance is a single fire loss in that class. Refitting without that record gives the class a relativity of 0.70, with a p-value of 0.02. The other classes' relativities barely change.
Which conclusion about the validity of this rate class is best supported?
- A) The class is riskier than average, because the full-data estimate is significant at the 1% level
- B) The class is safer than average, so the fire loss should be removed from the data permanently
- C) The class should be split further, to isolate risks like the one that had the fire
- D) The model's link function is wrong, so the whole model needs to be rebuilt before any class is judged
- E) The class's indication is unstable, so neither estimate should be given full weight
Answer this question and see the worked solution