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ADDRESSING IMBALANCED INSURANCE DATA THROUGH ZERO-INFLATED POISSON REGRESSION WITH BOOSTING

Published online by Cambridge University Press:  17 December 2020

Simon C.K. Lee
Simon C.K. Lee*
Affiliation:
Department of Statistics and Actuarial Science, The University of Hong Kong, E-Mail: slee2016@hku.hk
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Abstract

A machine learning approach to zero-inflated Poisson (ZIP) regression is introduced to address common difficulty arising from imbalanced financial data. The suggested ZIP can be interpreted as an adaptive weight adjustment procedure that removes the need for post-modeling re-calibration and results in a substantial enhancement of predictive accuracy. Notwithstanding the increased complexity due to the expanded parameter set, we utilize a cyclic coordinate descent optimization to implement the ZIP regression, with adjustments made to address saddle points. We also study how various approaches alleviate the potential drawbacks of incomplete exposures in insurance applications. The procedure is tested on real-life data. We demonstrate a significant improvement in performance relative to other popular alternatives, which justifies our modeling techniques.

Keywords

Boosting treespredictive modelinginsurancemachine learningimbalanced datazero-inflated PoissonC14
Type
Research Article
Information
ASTIN Bulletin: The Journal of the IAA , Volume 51 , Issue 1 , January 2021 , pp. 27 - 55
Copyright
© 2020 by Astin Bulletin. All rights reserved

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