What type of probability distribution will the consulting firm most likely employ to analyse the insurance claims in the following problem? An insurance company has called a consulting firm to determine if the company has an unusually high number of false insurance claims.It is known that the industry proportion for false claims is 3%.The consulting firm has decided to randomly and independently sample 100 of the company's insurance claims.They believe the number of these 100 that are false will yield the information the company desires.
A) Binomial distribution.
B) Poisson distribution.
C) Hypergeometric distribution.
D) None of the above.

Question

Quizplus · Accepted Answer

The situation described in the problem is an example of a binomial distribution, where we have a fixed number of trials (sampling 100 insurance claims), each trial has two possible outcomes (false or not false), the trials are independent, and the probability of success (false claims) is known and constant (3%). Therefore, the consulting firm can use the binomial distribution to determine the probability of getting a certain number of false claims out of the 100 sampled, and compare it to the expected number of false claims based on the industry proportion.

What Type of Probability Distribution Will the Consulting Firm Most