Keiser University Statistics and Processes Paper

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Business Finance

Keiser University

Description

Competency

Examine the application of statistical functions and derivatives as instruments for measuring risks.

Instructions

You will assume the role of a senior analyst hired by a fictitious company, Premium Acceptance, a midsized property insurance carrier. Premium Acceptance is performing well with respect to several key performance indicators, including policies in force, policy retention, and new business counts.

One of your objectives as the newly appointed senior risk analyst is to develop a framework for managing loss ratios which is one of the firm's largest key performance indicators. A loss ratio is simply the difference between the ratio of claims paid by an insurance carrier and the ratio of premiums paid. The board of directors depends on the ability to forecast loss ratios, which in turn enables them to forecast profitability metrics to the shareholders. The organization will now consider implementing the use of statistics for measuring risks.

Your deliverable should be composed in a report. Be sure to address the following items:

  • Explain how statistics is used to formally define risk in the risk assessment process.
  • Discuss at least two statistical tools that can be employed to measure risk.
  • Convey which tool best serves the company's purposes and explain why it is.
  • What are the ramifications of the organization electing not to use statistics in this process?

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Explanation & Answer

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Running Head: STATISTICS AND PROCESSES

1

Statistics and Processes
Instructor
Class
Date
Name

STATISTICS AND PROCESSES

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Risks in any assessment can be characterized and generated by a quantitative risk but
ideally based on the numerical data that is gathered for statistical purposes. Statistics are
formally utilized to define risks through the gathering of data, documenting the data, and fully
referencing the synthesized outcome with a logical and transparent method (Buchanan & Smith
& Long, 2000). Statistical data gathered is the most appropriate method of assessing risks and
acquiring the probability of outcomes concerning the risks that are or could be involved. A
qualitative risk assessment relates the descriptions in which a prospect of the unwanted result is
related to the subjective nature of the wanted (Buchanan & Smith & Long, 2000). This...


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