You are a manager working for an insurance company. Your job entails processing

Question

You are a manager working for an insurance company. Your job entails processing individual claims filed by policyholders. In general, most claims are relatively minor, costwise, but a few are quite expensive. Each quarter, you compile a report summarizing key claims statistics that includes the number of claims submitted, the mean cost per claim, the median cost per claim, the proportion of claims being litigated, the number of emergency procedures, the proportion of men versus women, and the average age of claimants. Your measures are computed separately for the southern and northern regions, and you are interested in determining whether or not there are statistically significant differences between the two regions on each of the aforementioned measures.

Evaluate which comparisons would require the use of the t-test and which would use the chi-squared test.

Explain your answers. Support your discussion with relevant examples, research, and rationale.

Explanation / Answer

HereiIt is stated that the various statistics would be computed for each quarter for each of the 2 regions and then the interest is in determining whether or not there are statistically significant differences between the 2 regions.

I would say that the mean cost per claim, the median cost per claim, and the average age could be analyzed by the T-test since the level of measurement is at least on the ordinal scale.

The number of claims, proportion of claims being litigated, number of emergency procedures, and proportion of mean versus women would probably best be analyzed by the chi-square test because they are essentially count or nominal data.

However, under the right circumstances depending on the design of the experiment any of these could be analyzed by the T-test since the counts could be reasonably assumed to follow a normal distribution.

I hope this is helpful. Good Luck :-)

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