8/14/2019 Part of Chapter 5 the Magic & Psychology of Numbers viki

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Chapter 5The Science of Statistics

The application of statistics can be on quantitative data on any subject, it involves comparingthe distribution of some quantity for different subclasses, for example such as governmentpublications of birth and death rates often called vital statistics. It can also function assingular. When the classification and interpretation of these data in accordance withprobability theory and the application of methods such as hypothesis in testing them.A mathematical study of the theory of such distribution and tests are Descriptive Statistics or Statistical Inference. Theory methods and practice of forming judgements about parametersare based on random sampling. The sampling is placed within statistical tables which reflectthe values of the cumulative distribution of certain common distributions for different valuesof parameters.The probability within statistics measure or estimate the degree of confidence one may havein the occurrence of an event, measured on a scale from (0) impossibility to (1) certainty.

The proportion of a favourable outcome are the total number of possible outcomes, thusstatistics have incorporated the mathematical theory of probability as discussed withinchapter one. Statistics gives an important insight into risk factors, often used by financialinstitutions and insurance companies. There are insurance companies in Brittan thatconcluded after a risk analysis, that there are a definite link between occupation and claims.School teachers, bakers, bank officials, and local government employees, off duty policeofficers, prison wardens and fire officers are seen as low risk. Students, doctors, butchers,bookmakers, television producers, professional entertainers and all members of the armedforces are seen as high risk and are burdened with appropriately loaded premiums. All thisdata was drawn from statistical data and evaluation.In South Africa it was found that woman are overall safer drivers than men and statistics alsoshowed that younger drivers have more accidents that more experienced driver. Thisstatistic is derived from claims. Thus premiums are calculated on this basis as well andinsurance companies would rather market intensively to the lower risk to strengthen their asset base. We also have to keep in mind that these statistics will not remain the same sincewe live within a changing world, and the human factor are just as unpredictable as nature.Actuaries decisions appear to save their companies money, but rational, analytical andobjective factors becomes hard to identify, justify or define on which grounds, for instance, abanker is lower risk than an accountant and which group are more accident prone thananother, except for the Law of Large Numbers.If we look at the number of samples the statistical result that the average of samples are

independent, identically distributed random variable that tends to their common mean as ittends to infinity. The comparative frequency of the event independently recurring tends to itsprobability as it increases.Customers take all the risk and the insurance companies never lose. Strong law of largenumbers is a precise formulation in terms of a point wise convergent sequence. There ishowever another side to this law known as the weak law of large numbers.The law refer to the various results concerned with the convergence in measure of thesequence of averages of a sequence of random variable to their mean.The word mean within context are the value of a variable including its probability, the sum of which are taken over the whole range of the variable and are obtained by summing theobserved values in the sample and dividing this by their quantity. However the human factor is far more complex in its makeup and there are certain aspects we simply cannot predict.

8/14/2019 Part of Chapter 5 the Magic & Psychology of Numbers viki

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