Concordance Probability for Insurance Pricing Models

Jolien Ponnet, Robin Van Oirbeek and Tim Verdonck
Additional contact information
Jolien Ponnet: Department of Mathematics, Katholieke Universiteit Leuven, 3000 Leuven, Belgium
Robin Van Oirbeek: Data Office, Allianz Benelux, 1000 Brussels, Belgium
Tim Verdonck: Department of Mathematics, Katholieke Universiteit Leuven, 3000 Leuven, Belgium

Risks, 2021, vol. 9, issue 10, 1-26

Abstract: The concordance probability, also called the C-index, is a popular measure to capture the discriminatory ability of a predictive model. In this article, the definition of this measure is adapted to the specific needs of the frequency and severity model, typically used during the technical pricing of a non-life insurance product. For the frequency model, the need of two different groups is tackled by defining three new types of the concordance probability. Secondly, these adapted definitions deal with the concept of exposure, which is the duration of a policy or insurance contract. Frequency data typically have a large sample size and therefore we present two fast and accurate estimation procedures for big data. Their good performance is illustrated on two real-life datasets. Upon these examples, we also estimate the concordance probability developed for severity models.

Keywords: C-index; performance measure; efficient algorithm; frequency; severity; clustering (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2227-9091/9/10/178/pdf (application/pdf)
https://www.mdpi.com/2227-9091/9/10/178/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jrisks:v:9:y:2021:i:10:p:178-:d:651452

Access Statistics for this article

Risks is currently edited by Mr. Claude Zhang

More articles in Risks from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().