GLM to estimate the pure prenium (frequency of claims*claim costs)...I've began that since I red the following text: I've found this text on casact.org (Casualty Actuarial Society): "Cluster analysis applies a collection of different algorithms to group these units into clusters based on historical experience, modeled experience, or well-defined similarity rules. This allows easier incorporation into GLMs." it is essential to take into account the heterogeneity in pricing yet.....I don't understand their reasoning. GLM to estimate the pure prenium (frequency of claims*claim costs). 1) Classical method: (This method is without STEP 1) The average claim frequency for customers in Area A1 and in the ageGroup 20-29 is then: 0,044 * 0,689 * 0,472 = 0,014 intercept=0.044 In the same way we calculate the average claim size for this group to be 61037 * 1,873 * 0,789 = 90211 The pure premium for this group is then 0,014*90211=1263. (SAS souce)=http://www2.sas.com/proceedings/forum2008/333-2008.pdf Do you understand my questions? Thanks for your help.
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