Hurricane Katrina forced insurance companies to examine policy rates which previously determined that an average claim amount was $1900.00. Due to the high volume of claims submitted, a review was ordered to determine if the company was losing money. A review of the average amount determined that the true mean was higher and could potentially lead to future financial losses.
A random sampling was conducted by selecting fifty companies for participation that processed claims related to Hurricane Katrina. Then, one claim was randomly selected from each of the companies that processed claims as a result of the hurricane, a hypothesis test will be completed to accept or reject the hypothesis.