CAA Associate Actuary (China)

Practice session

In an actuarial driver risk classification model, 20% of insured drivers are classified as high-risk ($H$) and 80% as low-risk ($L$). The annual probability of having at least one accident is 0.30 for high-risk drivers and 0.05 for low-risk drivers. If a newly insured policyholder has an accident in their first year, what is the posterior probability that they belong to the high-risk class under Bayes' Theorem?

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