Year Claim Amount Paid Number of Claims Incurred

1 $352,256 5

2 $400,000 6

3 $256,187 2

4 $375,898 6

5 $500,784 7

6 $475,395 3

7 $450,587 6

8 $460,578 6

9 $455,872 7

10 $501,556 5

1.Calculate the mean of the claim amount paid over the time period.

2.Calculate the mean of the number of claims incurred over the time period.

3.Calculate the standard deviation of these losses.

Calculate mean (round up to nearest dollar for all calculations)

Subtract mean from observation

Square each of the results

Sum the squares

Divide the sum of squares by number of observations - 1

Calculate square root of resulting number (round to two decimal points)

4.Why is this important?

5.Calculate the coefficient of variation of these losses.

Divide a distribution's standard deviation by its mean

6.Why should Signature Manufacturing try to forecast what the total amount paid to worker's compensation claims will be next year?

7.Should Signature Manufacturing use probability analysis or trending for forecasting and why?