Answered: Online insurance I After seeing…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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Question

Online insurance I After seeing countless commercials
claiming one can get cheaper car insurance from an
online company, a local insurance agent was concerned
that he might lose some customers. To investigate, he
randomly selected profiles (type of car, coverage, driving
record, etc.) for 10 of his clients and checked online price
quotes for their policies. The comparisons are shown in

the table below. His statistical software produced the fol-
lowing summaries (where PriceDiff = Local - Online):

At first, the insurance agent wondered whether there was
some kind of mistake in this output. He thought the
Pythagorean Theorem of Statistics should work for
finding the standard deviation of the price differences—
in other words, that SD1Local - Online2 =
2SD2
1Local2 + SD2

1Online2. But when he checked,
he found that 21229.28122 + 1256.26722 = 343.864,
not 175.663 as given by the software. Tell him where his
mistake is.

Variable Count Mean StdDev
Local 10 799.200 229.281
Online 10 753.300 256.267
PriceDiff 10 45.9000 175.663
Local Online PriceDiff
568 391 177
872 602 270
451 488 -37
1229 903 326
605 677 -72
1021 1270 -249
783 703 80
844 789 55
907 1008 -101
712 702 10

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