Question

You are trying to explain the variation in the dollar amount of automobile insurance claims submitted in each state in the United States. Identify at least 5 variables that you believe would best explain this difference among states. In addition, identify whether the independent variable is directly or inversely related to the dependent variable.

Answer 1

The variations in the amount of automobile insurance claims submitted in each state is dependent on the factors listed below

• The share of urban population
• Price level
• Traffic density
• Gender
• Age

The share of urban population, price level and traffic density is directly related to the dependent variable that is the amount of automobile insurance claims submitted.

If the share of the urban population is more then there will be more usage of automobiles. So there are higher chances for more number of claims to be submitted.

If the prices are high the expenses incurred in order to rectify the damages will also be high.

High traffic density indicates that more people use automobiles. So there are chances for the claims also to be high.

In the case of gender, the states that has more female drivers than the number of males tend to have low insurance claims.

The age is also a determining factor. If the population of the state consists of less number of people who belongs to the younger generations, then the claims submitted tend to be less. Adults are generally considered as good drivers than youngsters.