Exam MAS-I Practice Question 130
Study guide: Exam MAS-I
Exploratory analysis of commercial property claim severity (claims with payment only) shows:
- A histogram: every claim is positive, with a strong right skew and a long right tail.
- Side-by-side box plots by occupancy class: the medians are 3, 6 and 12 (thousands), and the interquartile ranges are 2, 4 and 8. Each box's spread is in the same proportion to its median.
- A scatter plot against building value: severity rises with value, in a wedge that widens steadily as value increases.
The actuary wants the GLM whose response distribution is consistent with the response's range of values and its skew, and whose variance changes with the mean the way these plots show. Which specification is most appropriate?
- A) Gamma distribution with a log link
- B) Poisson distribution with a log link
- C) Normal distribution with an identity link
- D) Tweedie distribution with power 1.5 and a log link
- E) Inverse Gaussian distribution with a log link
Answer this question and see the worked solution