Chapter 4

Question 1

Common Rating factors used by household insurer

Answer 1

Age of policy holder
Number of bedrooms
Number of bathrooms
Number of floors

Question 2

Important attributes of large sets of data

Answer 2

Minimum value within a set
Maximum value within a set
Spread of data
Averages contained within

Question 3

What are the 3 measures of average?

Answer 3

Arithmetic mean
Median
Mode

Question 4

What is the Range?

Answer 4

Difference between the largest and smallest value in a set

Question 5

What is the Variance?

Answer 5

A measure of how spread out the data is.

The variance is the standard deviation of a data set squared.

Question 6

What does a high standard deviation suggest?

Answer 6

Numbers within our set are spread out over a large range. Suggests claims experience is more volatile with occasional large claims

Question 7

What does a low standard deviation suggest

Answer 7

Numbers within our set are centred closely around the mean. i.e claims experience is fairly stable.

Question 8

Arithmetic mean

Answer 8

Add all the values together and divide by the number of values within that data set

Question 9

Median

Answer 9

Value that is halfway through the list of a values arranged in ascending order.

For example, in the following list of values:
1, 3, 8, 12, 20, 23, 26, 33, 40 the median = 20.
In situations where there is an even number of values and thus no middle value, the median is equal to the mean of the two central values. For example, in the following list of values:
45, 56, 90, 100, 120, 150, 175, 200 the median = (100 + 120) ÷ 2 = 110.

Question 10

Mode

Answer 10

Defined as the number which occurs most often in a set of data. There can be more than one mode.

The modal average is typically quoted in situations where the audience is interested in
measuring, for example:
– preferences;
– the most common number of bedrooms in a house; or
– the most frequent time period it takes a group of students to pass all their exams