One of the major measures of the quality of service provided by any organization is

the sp Claims fraud (illegitimate claims) and buildup (exaggerated loss amounts) continue to

be major issues of concern among automobile insurance companies. Fraud is defined

as specific material misrepresentation of the facts of a loss; buildup is defined as the

inflation of an otherwise legitimate claim. A recent study examined auto injury claims

closed with payment under private passenger coverages. Detailed data on injury,

medical treatment, claimed losses, and total payments, as well as claim-handling

techniques, were collected. In addition, auditors were asked to review the claim files

to indicate whether specific elements of fraud or buildup appeared in the claim and, in

the case of buildup,

to specify the amount of excess

payment.

The

file

Insurance Claims contains data for 90 randomly selected auto injury claims. The

following variables are included: CLAIM Claim ID; BUILDUP_

-1 if buildup indicated,

0 if not; and EXCESSFAYMENT- excess payment amount, in dollars.

a. Construct a 95% confidence interval for the population proportion of all auto injury

files that have exaggerated loss amounts.

b. Construct a 95% confidence interval for the population mean dollar excess payment

.