When Insurers or Risk Managers Use Frequency and Severity to Project

question 21

Multiple Choice

When insurers or risk managers use frequency and severity to project the future, they use trending techniques that apply to the loss distributions known to them.Identify the most commonly used tool to predict future losses and claims based on the past.

• A)Regression analysis
• B)ANOVA
• C)Factor analysis
• D)Chi square testing
• E)Analysis of covariance

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Definitions:

Operating ROA

A financial metric that measures the efficiency of a company's operations by dividing its operating income by its total assets, showing how well it generates income from its assets.

Return on Sales

A financial ratio that measures the efficiency of a company in generating profits from its revenue.

Tax Burden

The total amount of income, property, and sales taxes that an individual or business must pay to various governments.

Leverage Ratio

A financial ratio indicating the level of debt used by a business to finance its assets and operations.