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)

3.1Transform the figures in Table 2 into one comparable measure of risk by expressing each probability as a decimal, rounded to four decimal places.

3.2If crimes categorised as burglary and violence against the person are independent events, what is the chance (expressed in percentage) of being a victim of both crimes next year in West Mercia?

3.3Give 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.

3.4Briefly explain 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.