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As the Automobile Accident Rate Increases, Insurers Are Forced to Increase

question 8

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As the automobile accident rate increases, insurers are forced to increase their premium rates. Companies such as Allstate have recently been running a campaign they hope will result in fewer accidents by their policyholders. For each six-month period that a customer goes without an accident, Allstate will reduce the customer's premium rate by a certain percentage. Companies like Allstate have reason to be concerned about driving habits, based on a survey conducted by Drive for Life, a safety group sponsored by Volvo of North America, in which 1,100 drivers were surveyed. Among those surveyed, 74% said that careless or aggressive driving was the biggest threat on the road. One-third of the respondents said that cell phone usage by other drivers was the driving behavior that annoyed them the most. Based on these data, assuming that the sample was a simple random sample, construct and interpret a 95% confidence interval estimate for the true proportion in the population of all drivers who are annoyed by cell phone users.

Definitions:

Unacceptable Behavior

Actions or conduct that are considered inappropriate or unacceptable in a given context or society.

Preventative Measures

Actions taken to reduce the likelihood of an undesirable event or condition occurring.

Guiding Behavior

The process of influencing individuals' actions and attitudes in a positive manner, often used in the context of parenting and education.

Natural Consequences

The outcomes that naturally follow from a person's actions without any external intervention.