Hi, I am confused by the following statement in the solution "The two youngest age groups are the most sensitive to the renewal premium" Is this true because there is no interaction term between these age groups and ratio of renewal premium to last year's premium? if so, why is this? Thanks!
Not quite o.menary. The third table shows us that there IS is an interaction term within the model between policyholder age and the ratio of renewal premium to last year’s premium. (This is because the LPs in the interaction table are zero. This means that, unlike for the older age groups, there is no downward adjustment to make to the LPs obtained separately from the ‘policyholder age’ table and the table with heading ‘renewal premium / last year’s premium’.)
