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Computational intelligence with applications to general insurance: a review

I – The role of statistical learning

Published online by Cambridge University Press:  18 May 2012

Pietro Parodi
Pietro Parodi*
Affiliation:
Willis Global Solutions (Consulting Group), London
*
*Correspondence to: Pietro Parodi, Willis Global Solutions (Consulting Group), Willis Ltd, 51 Lime Street, London EC3 M 7DQ. E-mail: [email protected]
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Abstract

This paper argues that most of the problems that actuaries have to deal with in the context of non-life insurance can be usefully cast in the framework of computational intelligence (a.k.a. artificial intelligence), the discipline that studies the design of agents which exhibit intelligent behaviour. Finding an adequate framework for actuarial problems has more than a simply theoretical interest: it also allows a knowledge transfer from the computational intelligence discipline to general insurance, wherever techniques have been developed for problems which are common to both contexts. This has already happened in the past (neural networks, clustering, data mining have all found applications to general insurance) but not systematically, with the result that many useful computational intelligence techniques such as sparsity-based regularisation schemes (a technique for feature selection) are virtually unknown to actuaries.

In this first of two papers, we will explore the role of statistical learning in actuarial modelling. We will show that risk costing, which is at the core of pricing, reserving and capital modelling, can be described as a supervised learning problem. Many activities involved in exploratory analysis, such as data mining or feature construction, can be described as unsupervised learning. A comparison of different computational intelligence methods will be carried out, and practical insurance applications (rating factor selection, IBNER analysis) will also be presented.

Keywords

Statistical learningMachine learningIntelligent agentsRisk agentsRegularisationGLMNeural networks
Type
Papers
Information
Annals of Actuarial Science , Volume 6 , Issue 2 , 23 August 2012 , pp. 307 - 343
Copyright
Copyright © Institute and Faculty of Actuaries 2012

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