Wednesday, March 12, 2008

The Next Fiasco - Premiums from Credit Data

A company I was with was building a modeling system to look at individual credit history, compare it with insurance premiums and losses, and identify customers where the insurance premium was either too high or too low. I was only peripherally involved with the project and only brought in at the end. What we were asked to predict was the overpayment or underpayment ratio so the insurance companies could adjust their premiums.

The project started by receiving large files from the client and starting the model building process. The team decided to start out with a simpler problem by predicting if there was a claim or not, and once that problem was solved using the understanding gained to move on to the larger problem.

Things didn't work out so well.

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