Question
A health insurance company wants to use greatest accuracy credibility to estimate its premiums. It has 2 years of experience with one policyholder. Average claims
A health insurance company wants to use greatest accuracy credibility to estimate its premiums. It has 2 years of experience with one policyholder. Average claims in the first year were $800, with variance 40,000. There is inflation of 5% every year. During the second year, a pandemic caused an average of $700 of claims per policyholder with variance 600,000 in addition to (and independent of ) the usual claims. These claims were not correlated with usual claims. The correlation between usual claims is 0.6 in consecutive years, and 0.36 between years 2 years apart. The company wants to use an estimateX3=0+1X1+2X2 for the premium in Year 3.calculate 0,1,2
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