Trevor is modeling monthly incurred dental claims. Trevor has 48 monthly claims observations and three potential predictors:

• Number of weekdays in the month
• Number of weekend days in the month
• Average number of insured members during the month

Trevor obtained the following results from a linear regression:

	Coefficient	Standard Error	t Stat	p-value
Intercept	–45,765,767.76	20,441,816.55	–2.24	0.0303
Number ofweekdays	513,280.76	233,143.23	2.20	0.0330
Number ofweekend days	280,148.46	483,001.55	0.58	0.5649
Average numberof members	38.64	6.42	6.01	0.0000

Determine which of the following variables should be dropped, using a 5% significance level.

• Intercept
• Number of weekdays
• Number of weekend days
• Number of members.

• I only
• II only
• III only
• IV only
• None should be dropped from the model

Copyright 2023. The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.

Key: C

Only variables with a p-value greater than 0.05 should be considered. Because only one of the variables (Number of weekend days) meets this criterion, it should be dropped.

Copyright 2023. The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.