Average Life Expectancy and ABI Insurance Tracking 

Question

Insurance companies track life expectancy information to assist in determining the cost of life insurance policies.  Last year the average life expectancy of all policy holders that were paid out was 77 years.  ABI Insurance wants to determine of their clients now have a longer life expectancy on average, so they randomly sample 101 of their recently paid policies.  The insurance company will only change their premium structure if there is evidence that people who buy their policies are living longer than before.  The sample has a mean of 78.6 years and a standard deviation of 4.48 years.  Use a 1% significance level to answer the following.

• Write the null and alternative hypotheses.
• What is the alpha level and critical value?
• What is the value of the test statistic?
• What is the p-value of the test?

State your conclusion with evidence.

Summary

This question belongs to statistics and discusses about insurance companies tracking life expectancy information to assist in determining the cost of life insurance policies.

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