Modeling frequency and severity of claims with the zero-inflated generalized cluster-weighted models
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Publication:2212142
Abstract: In this paper, we propose two important extensions to cluster-weighted models (CWMs). First, we extend CWMs to have generalized cluster-weighted models (GCWMs) by allowing modeling of non-Gaussian distribution of the continuous covariates, as they frequently occur in insurance practice. Secondly, we introduce a zero-inflated extension of GCWM (ZI-GCWM) for modeling insurance claims data with excess zeros coming from heterogenous sources. Additionally, we give two expectation-optimization (EM) algorithms for parameter estimation given the proposed models. An appropriate simulation study shows that, for various settings and in contrast to the existing mixture-based approaches, both extended models perform well. Finally, a real data set based on French auto-mobile policies is used to illustrate the application of the proposed extensions.
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Cited in
(8)- Model-based clustering via skewed matrix-variate cluster-weighted models
- Risk classification for claim counts: a comparative analysis of various zero-inflated mixed Poisson and hurdle models
- On modeling claim frequency data in general insurance with extra zeros
- Gamma mixture density networks and their application to modelling insurance claim amounts
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- Finite mixture model of hidden Markov regression with covariate dependence
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