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CP1 - Chapter 20

K

kimiko

Very Active Member
Can you kindly explain the answer to the question on page 16 of Chapter 20? I don't understand how this relates to time selection:

"Individuals with life assurance policies where the sum assured exceeds say £100,000, given the higher sum assured may suggest they are more likely to have taken out the policy recently."
 
Hi Kimiko,

At the start of this chapter, there is an overview of the word 'selection', and how it is taken to mean the source of heterogeneity itself. So, we could say that in more recent years, individuals would be more likely to take out life assurance valued at over 100k compared to in previous years, perhaps due to inflation. As such, the time at which policies are taken out are the source of heterogeneity (ie more higher valued life assurances in more recent years).

Thanks
Aman
ActEd Tutor
 
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