Using Data Mining for Modeling Insurance Risk and Comparison of Data Mining and Linear Modeling Approaches

Inna Kolyshkina, Dan Steinberg and N. Scott Cardell
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Inna Kolyshkina: Global Risk Management Solutions (Actuarial), Pricewaterhouse Coopers, Level 14, 201 Sussex Street, PO Box 2650, Sydney 1171, Australia
Dan Steinberg: Salford Systems, 8880 Rio San Diego Drive, Suite 1045, San Diego, CA 92108, USA
N. Scott Cardell: Salford Systems, 8880 Rio San Diego Drive, Suite 1045, San Diego, CA 92108, USA

Chapter 14 in Intelligent and Other Computational Techniques in Insurance:Theory and Applications, 2003, pp 493-522 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractThe following sections are included:IntroductionData Mining – the New Methodology for Analysis of Large Data Sets – Areas of Application of Data Mining in InsuranceOrigins and Definition of Data Mining. Data Mining and Traditional Statistical TechniquesData Mining and On-line Analytical Processing (“OLAP”)The Use of Data Mining within the Insurance IndustryData Mining Methodologies. Decision Trees (CART), MARS and Hybrid ModelsClassification and Regression Trees (CART)Multivariate Adaptive Regression Splines (MARS)Hybrid ModelsCase Study 1. Predicting, at the Outset of a Claim, the Likelihood of the Claim Becoming SeriousProblem and BackgroundThe Data, Its Description and Preparation for the AnalysisThe Analysis, Its Purposes and MethodologyAnalysis Using CARTBrief Discussion of the Analysis Using Logistic Regression and Comparison of the Two ApproachesFindings and Results, Implementation Issues and Client FeedbackConclusion and Future DirectionsCase Study 2. Health Insurer Claim CostBackgroundDataOverall Modeling ApproachModeling MethodologyModel Diagnostic and EvaluationGains Chart for Total Expected Hospital Claims CostActual versus Predicted ChartFindings and ResultsHospital Cost Model PrecisionPredictor Importance for Hospital CostImplementation and Client FeedbackNeural NetworksConclusionAcknowledgmentsReferences

Keywords: Insurance; Actuarial Science; Neural Networks; Fuzzy Systems; Computational Intelligence; Computational Techniques; Life and Health Insurance; Property and Casualty Insurance (search for similar items in EconPapers)
Date: 2003
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