Exam MAS-I Practice Question 9
Study guide: Exam MAS-I
An auto portfolio's claim counts follow a mixed Poisson process. Each insured has a fixed annual claim rate \Lambda drawn from a gamma distribution, and given \Lambda its claims follow a Poisson process. Insured X had 3 claims last year and insured Y had none. Nothing else distinguishes them.
Which statement about their expected numbers of claims next year is correct?
- A) X's is higher, because X's claims raise the expected value of its rate
- B) They are equal, because the process has independent increments
- C) They are equal, because the process has stationary increments
- D) Y's is higher, because X's claims make further claims less likely
- E) X's is exactly 3, because an insured's own count estimates its rate
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