Exam MAS-II Practice Question 19
Study guide: Exam MAS-II
An actuary compares the current rating plan with a proposed GLM using simple quintile plots built on a holdout data set. Each plot sorts the data by that model's predicted loss cost into quintiles of equal exposure; all values are divided by the overall average.
| Quintile | 1 | 2 | 3 | 4 | 5 |
|---|---|---|---|---|---|
| Current plan — predicted | 0.70 | 0.90 | 1.00 | 1.10 | 1.30 |
| Current plan — actual | 0.80 | 0.98 | 0.95 | 1.08 | 1.20 |
| Proposed GLM — predicted | 0.55 | 0.80 | 1.00 | 1.20 | 1.45 |
| Proposed GLM — actual | 0.58 | 0.82 | 1.03 | 1.16 | 1.41 |
Which of the following conclusions is best supported?
- A) The current plan is better, because predictions nearer the average are more stable and so more accurate
- B) Neither can be preferred, because a quantile plot cannot compare two models without a double lift chart
- C) The proposed GLM is better on lift, but the current plan is better on predictive accuracy
- D) The current plan is better, because its actual values never exceed its predicted values in the top quintile
- E) The proposed GLM is better on predictive accuracy, monotonicity and lift between the first and last quintiles
Answer this question and see the worked solution