[R] A coding question involving variable assignments in ifelse()

Duncan Murdoch murdoch at stats.uwo.ca
Thu Apr 26 18:59:42 CEST 2007

```On 4/26/2007 12:48 PM, xpRt.wannabe wrote:
> Dear List,
>
> Below is a simple, standard loss model that takes into account the
> terms of an insurance policy:
>
> deductible <- 15
> coverage.limit <- 75
> insurance.threshold <- deductible + coverage.limit
>
> tmpf <- function() {
> loss <- rlnorm(rpois(1, 3), 2, 5)
> sum(ifelse(loss > insurance.threshold, loss - coverage.limit,
> pmin(loss, deductible)))
> }
> net <- replicate(1000000, tmpf())
>
> Now, I would like to enhance the model by incorporating the following
> two probabilities:
>
> 1. Probability of claim being accepted by the insurance company, say, 0.8
> 2. Probability of payout by the insurance company, say, 0.999
>
> Could anyone suggest how one might do this?

A general way to generate events with probability p is runif(n) < p.  So

n <- length(loss)
accept <- runif(n) < 0.8
payout <- runif(n) < 0.999

and then require "accept & payout"  before any payment at all, e.g.

sum(ifelse(accept & payout, [ your old ifelse expression ], 0))

There are a lot of implicit independence assumptions here; they may not
be very realistic.

Duncan Murdoch

```