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Hypothesis Testing: Paired t test of auto insurance

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The president of the American Insurance Institute wants to compare the yearly costs of
auto insurance offered by two leading companies. He selects a sample of 15 families,
some with only a single insured driver, others with several teenage drivers, and pays each
family a stipend to contact the two companies and ask for a price quote. To make the
data comparable, certain features, such as the deductible amount and limits of liability, are standardized. The sample information is reported below. At the .10 significance level,
can we conclude that there is a difference in the amounts quoted?
Progressive GEICO
Family Car Insurance Mutual Insurance
Becker $2,090 $1,610
Berry 1,683 1,247
Cobb 1,402 2,327
Debuck 1,830 1,367
DuBrul 930 1,461
Eckroate 697 1,789
German 1,741 1,621
Glasson 1,129 1,914
King 1,018 1,956
Kucic 1,881 1,772
Meredith 1,571 1,375
Obeid 874 1,527
Price 1,579 1,767
Phillips 1,577 1,636
Tresize 860 1,188

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Solution Summary

The solution provides step by step method for the calculation of test statistic for comparing the yearly costs of auto insurance offered by two leading companies. Formula for the calculation and Interpretations of the results are also included. Interactive excel sheet is included. The user can edit the inputs and obtain the complete results for a new set of data.

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