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Evaluation

RPM Seminar

Ratemaking

Level 1: No prior knowledge of the subject (0-3 Years)

C:PC:L1

C:MM:L2

C:FE:L1

S:DA:L1

S:DA:L2

S:LT:L1

T:CO:L2

T:CR:L2

R-4 - GLM for Dummies (and Actuaries)

Tuesday, March 19, 2024
2:45 PM – 3:45 PM CST
CE: 1.2
Session Description: Generalized Linear Models (GLM) have become an insurance industry standard for classification ratemaking. However, some of the technical language used in explaining what a GLM is doing in its calculation can be obscure and intimidating to those not familiar with the tool. This session will approach GLM in terms of the estimating equations used in the fitting, explaining the concept as an optimal weighted-average strategy. A numerical example will be used to illustrate the use of GLM in classification ratemaking. The example will be included in Excel for those who would like to follow along the details.

Learning Objectives:

  • Illustrate ratemaking as a “textbook example” of a Generalized Linear Model (GLM)
  • Understand GLM as a system of weighted averages based on the Estimating Equations being solved to find the best parameters.
  • Show how credibility (or regularization) is incorporated into GLM.