April 2016
Intermediate to advanced
284 pages
9h 26m
English
book
Practical Spreadsheet Risk Modeling for Management
by Dale Lehman, Huybert Groenendaal, Greg Nolder
Content preview from Practical Spreadsheet Risk Modeling for Management
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86 Practical Spreadsheet Risk Modeling for Management
3.3 AUTOMOBILE INSURANCE: MORAL
HAZARD AND ADVERSE SELECTION
Data from an automobile insurance company show that claims fre-
quency and size are affected by what type of insurance is chosen by an
individual.
*
The data are from an Israeli insurer for the years 1994–1999.
Table 3.1 provides relevant data. Model the claims frequency using a
Poisson distribution (to allow for more than one claim per policy holder)
and use a Lognormal distribution for the size of claims (with the mean
given in Table3.1 and standard deviation equal to the mean). Assume
that 1,000 drivers are insured by ...
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