Question

Suppose you work for an automobile insurance company and are part of a team who is analyzing your high-risk pool of drivers for the 2018 calendar year. High-risk drivers are those drivers who, prior to 2018, were cited for two or more accidents over the past five years. You collect a random sample of driver data from your list of high-risk drivers insured by your company and plan to use this to infer about future years. Column A includes binary data coded as 1 if the driver was under the age of 30 as of January 1, 2018, and coded as 0 otherwise. Column B includes data coded as 1 if the driver was cited for at least one accident in 2018 and coded as 0 if not cited for any accidents in 2018.

Use this sample of data to test whether more than half of your insured high-risk drivers have an accident over the next year. Use the p-value approach and a 5% significance level.

   a) State your null and alternative hypotheses.

   b) report your test statistic.

   c) report your p-value.

   d) report the conclusion of your test.

Answer 1

a) Null Hypothesis: H0: >= 0.50

Alternate Hypothesis: H1: < 0.50

b)

c)

d) As p-value is greater than the value of alpha

Decision: Fail to reject the null hypothesis