Question 3

Table 2 shows some data related to crime in different areas of England. When answering the questions that follow, assume that the rates of offences in each area in the year ending June 2020 are valid indicators of the current annual risks of these offences.

Table 2 Rates of police recorded crime for burglary and violence against the person for selected areas of England and Wales, year ending June 2020

Region	Burglary	Violence against the person
NorthWales	4 per thousand of population	36.4 per thousand of population
SouthYorkshire	0.92%	3.40%
DevonandCornwall	1 in 370 of population	1 in 44 of population
WestMercia	0.0047	0.0264

Source: Adapted from Office for National Statistics (2020)

3.3 Give two reasons why a particular household in South Yorkshire may in fact be at a lower risk of burglary than the probability shown in the table. (4marks)

3.4 Briefly explain in your own words the meaning of 'adverse selection'. Discuss how adverse selection might provide a greater problem for mutual insurance pricing models than individual risk-based pricing for home contents insurance. (5marks)