Question

You are the Claims Manager for a large auto insurance firm. You know the following facts:

• 25% of your policy-holders are younger (age 16-34). Within this group, 55% are men and

  45% are women. Only some of these policy holders make an accident claim. The men have a

  10% probability of making a claim, while the women have a 5% probability of making a claim.

• 50% of your policy-holders are middle-aged (ages 35-59). Of these, 50% are men and 50%

  are women. Only some of these policy holders make an accident claim. The men and women

  within this age group have 4% and 3% probabilities of making a claim, respectively.

• 25% of your policy-holders are older (ages 60 and above). Of these, 55% are women and 45%

  are men. Only some of these policy holders make an accident claim. The men and women

  each have a 2% probability of making a claim.

(a) What is the probability that a policy-holder who makes a claim is in the “16-34” age group?

(b) What is the probability that a policy-holder who does not make a claim is in the “60 and

above” age category?

Answer 1

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