Exam MAS-I Practice Question 92
Study guide: Exam MAS-I
An actuary is choosing an extended linear model for individual claim severity in a commercial property book. Exploratory analysis shows:
- every severity is strictly positive and the distribution is strongly right-skewed;
- within groups of similar risks, the standard deviation of severity is roughly proportional to the group's mean, so the coefficient of variation is roughly constant across groups;
- the rating plan is multiplicative, and it needs the model's fitted values to be mean severities on the dollar scale, with no further adjustment.
Which of the following models best meets all of these requirements?
- A) Normal response, identity link, fitted to severity
- B) Normal response, identity link, fitted to the log of severity
- C) Normal response, log link, fitted to severity
- D) Poisson response, log link, fitted to severity
- E) Gamma response, log link, fitted to severity
Answer this question and see the worked solution