IAI Actuarial Core Principles · Actuarial Statistics · Generalised linear models
A Poisson GLM with log link has fitted coefficient 0.18 for a binary factor (1 = urban, 0 = rural), other covariates equal. By what percentage is the expected claim count for urban higher than rural?
Urban expected claims are about 19.7% higher than rural, because with a log link the coefficient acts multiplicatively: e^0.18 ≈ 1.197, not an additive 18%.
- A18.0%
- B19.7%Correct
- C1.97%
- D8.0%
- 16.5%
Explanation
With a log link, the effect is multiplicative: e^0.18 = 1.1972, so about 19.7% higher. The 18% option wrongly reads the coefficient as a percentage on the original scale.
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