Group Work on Simulation

A health insurance product is designed targeting people with certain lifestyle. The premium charged is Rs. 5000 per policy. Considering the types of coverage in the policy, the probability that a policy will become a claim policy is estimated to be 0.2. The Insurance Company offering the cover has collected the data related to treatment expenses of various diseases covered under the scheme. Based on this, the claim amount is likely to vary linearly between Rs. 10000 to Rs. 50000. 

The company keeps 20% of the premium amount collected for meeting overhead and other expenses and only 80% is available for claim settlement.

The Insurance Company wants to do such business only if the probability of loss is less than or equal to 20%.

The probability of loss in the present case is quite high (over 90%). Recommend measures to reduce the probability of loss below 20%.

Make 4 sets of Simulation run of length 1000 for each of your recommendations and present the result in summarized form.

 

Last date for submission: 29th December 2012.

 

For practice on AHP

The work is related to decision making by ranking of alternatives. Suppose you have following alternatives to choose from at the end of the course:

 

1. 2 job offers

2. One admission offer for higher studies

3. Two opportunities to start own business

 

Identify factors that will be considered in evaluating the alternatives, assign weight to these factors, build some system to assign score to the alternatives in these factors, build a system to analyze these data and rank alternatives.

Question On LP formulation and Graphical Method

A Carpenter manufactures tables and chairs. He has all the resources in abundance except wood, a type of chemical and nails. The profitability and resource requirements for the two products are given in following table. The availability of resources per day is also given. How many tables and chairs he should manufacture daily so that his profit is maximized? Formulate the linear programme and solve that using graphical method. Assume that fraction values for number of tables and chairs are acceptable.          

 

	Table	Chair
Profit/unit->	20$	30$	Availability/day
Wood/unit in kg.	40	30	1200
Nails/unit in number	25	40	1000
Chemical in ml/unit	30	45	1600

 

 

One of the above mentioned resources is not limiting the solution. Identify that. 

 

The availability of this resource starts decreasing. What is the minimal availability for this resource that ensures it to remain a non-limiting factor?                                  

 

The availability is further reduced below this point by 100 units. Will the optimum solution change? If yes, what is/are the changed optimum solution/s?

An exercise on Project Management

Draw the activity network diagram for the project given below. Compute the earliest time and latest time for all the nodes. Be ready with your understanding of the project.

Class test question will be related to some decision situations arising due to change in resources or modification of process in some of the activities of this project.

It is recommended to bring your work in the test and answer the questions in the same sheet. You can attach extra sheet if required.

 

Activities	Immediate Predecessors	Activity Time in Days
A	None	10
B	None	12
C	None	18
D	A	15
E	B	20
F	C	25
G	D, E	15
H	D, E	18
I	E	8
J	E	9
K	J	7
L	F	10
M	K, L	12
N	I	5
O	G	22
P	H, N	21

 

A question on Project Management

Given below is a WBS of a project.

 

              

Activity	Activity time in days	Immediate Predecessors
a	30	--
b	20	--
c	15	a
d	18	b
e	32	b
f	25	c, d
g	22	c, d
h	17	e, g
i	8	e
j	15	i

 

 Draw an activity network diagram for this project and find the critical path by finding earliest time and latest time of various events. What is the project completion time?

A question on forecasting (time series)

The recorded number of claims in motor insurance in last 7 months are as follows:

 

35, 70, 45, 20, 50, 80 and 60.

 

Use moving average method to forecast the number of claims for next 3 months based on past 4 months data. The actual numbers of claims in 8^th and 9^th months are 100 and 30 respectively. 

 

Take a smoothing factor of 0.3 to forecast the 10^th month data using exponential smoothing forecasting technique. Don’t change the forecast of previous months.

Simulation Problem

A health insurance product is designed targeting persons working in Education sector. The age profile of people who has taken this policy is as follows:

 

21- 35 years     25%

35+ - 45 years 30%

45+ - 55 years 25%

55+  years       20%

 

Probability of claim is 0.2 in all the age groups however the claim amount varies linearly between Rs. 15000 to Rs. 80000 for age up to 45 years and between Rs. 30000 to Rs. 200000 for age above 45 years. Do a simulation run of length 10 to understand the claim pattern.

 

Use following random numbers 5971, 9987, 1741, 7431, 188, 5333, 3680, 4883, 5036, 5407, 2763, 7194, 3395, 3632, 1109, 9943, 6690, 6408