Exam DISC-DA Practice Question 224
Study guide: Exam DISC-DA
A classification tree for renewal lapse, fitted to 700 policies, has three leaves:
- Rate increase of 10% or less: 500 policies, 50 lapsed.
- Rate increase over 10% and tenure under 3 years: 40 policies, 26 lapsed.
- Rate increase over 10% and tenure of 3 years or more: 160 policies, 48 lapsed.
A policy facing a 15% rate increase has a tenure of 2 years. What class does the tree predict, and what is its estimated probability of lapse?
- A) Renew, with a lapse probability of 0.30
- B) Renew, with a lapse probability of 0.18
- C) Lapse, with a lapse probability of 0.65
- D) Lapse, with a lapse probability of 0.37
Answer this question and see the worked solution