Week 3 Homework: Highway Loss Data Institute Routinely

Week 3 Homeworkiqothe Highway Loss Data Institute Routinely Collects D

Find and interpret the first, second, and third quartiles for collision coverage claims based on given data points.

Data points: 6751, 9908, 3461, 21147, 2332, 2336, 189, 1185, 370, 1414, 4668, 1953, 10034, 735, 802, 618, 180, 1657.

Calculate the quartiles, interpret their significance in the context of collision claims, and analyze the distribution's characteristics.

Paper For Above instruction

The analysis of collision coverage claims is vital in understanding the distribution and variability of vehicle damage costs. Using the provided dataset, which includes 18 data points, we aim to determine the first, second, and third quartiles and interpret their implications in an insurance context.

First, we organize the data points in ascending order to facilitate accurate quartile calculation:

180, 189, 370, 618, 735, 802, 1185, 1414, 1657, 1953, 2332, 2336, 3461, 4668, 6751, 9908, 10034, 21147

To find the quartiles, we follow standard statistical procedures. The median (Q2), or second quartile, corresponds to the middle value of the ordered data. Since we have an even number of data points (18), the median is the average of the 9th and 10th values:

Median (Q2) = (1657 + 1953) / 2 = 1805

Next, the first quartile (Q1) is the median of the lower half of the data (first 9 values):

Lower half: 180, 189, 370, 618, 735, 802, 1185, 1414, 1657

Q1 = 5th value (since total is odd, median is the 5th value): 735

Thus, Q1 = 735.

Similarly, the third quartile (Q3) is the median of the upper half of the data (last 9 values):

Upper half: 1953, 2332, 2336, 3461, 4668, 6751, 9908, 10034, 21147

Q3 = 5th value in the upper half: 4668

Interpreting these quartiles: Q1 (735) indicates that 25% of collision claims are less than or equal to $735, reflecting relatively minor damages in some cases. Q2 (1805) shows the median claim amount, offering a central tendency. Q3 (4668) suggests that 75% of claims are less than or equal to $4,668, while 25% exceed this value, indicating a significant tail of high-cost claims.

This distribution appears right-skewed, with a few very high-cost claims (notably 21147), which increase the mean and create a long tail on the higher end. Understanding this spread helps insurers assess risk, price premiums, and reserve budgets accordingly.

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