Chapter 4

Question 1

Main measure of underlying risk

Answer 1

Exposure measure

Question 2

Risk factors

Answer 2

All elements of additional consideration that will help define the risk

Question 3

Rating factors

Answer 3

Elements of factors that can determine lvel of premium

Question 4

Arithmetic mean

Answer 4

total sum of / total frequency -> asking someone for the average

• includes all values
• can be distoreted easily
• meaningless if data set is whole numbers

Question 5

Mean vs Medain

Answer 5

Mode more suitable when:
- mean = dominant outliers
- valuable data ignored by taking middle value
- modal average used to measure:
- preferences
common number of bedrooms in a house
frewuent time period to do x

Question 6

Freq distro

Answer 6

Large number of data:
- summarise all types of numerical data

Question 7

Normal distro

Answer 7

Around the aeverage value

Question 8

Poisson distro

Answer 8

probability of certain number of events occurring with given timeframe

Question 9

Stochastic model

Answer 9

Estimate future occurrence and cost of claims -> EM siumlations

Question 10

Cat claims

Answer 10

Natural perils

Question 11

Latent claims

Answer 11

Hard to predict caused by diseases long delay from incident and it from manifesting

Question 12

Expected value of claims

Answer 12

total sum of probability x number of claims

Question 13

Limitations of stats data

Answer 13

• changes in underlying risk covered
• changes in uw policy
• changes in exposure overtime
• changes in legislation