Vehicle Insurance Prediction (Part 1)

5 min readNov 15, 2022

In this article, I will share my top 5 solution approach for predicting vehicle insurance. This part is focused on data & statistical analysis.

About Dataset and problem:

The Vehicle Insurance business is a multi-billion dollar industry. Every year millions and millions of premiums are paid, and a huge amount of claims also pile up.

You have to step into the shoes of a data scientist who is building models to help an insurance company understand which claims are worth rejecting and the claims which should be accepted for reimbursement.

You are given a rich dataset consisting of thousands of rows of past records, which you can use to learn more about your customers’ behaviours.

Link — https://machinehack.com/hackathons/analytics_olympiad_2022/overview

This article will be divided into 2 parts

Abstract

In this project, i was able to build a machine learning model with log_loss of 0.68076 using catboost algorithm with 5 stratified Kfold cross validation to predict which claims are worth rejecting and the claims which should be accepted for reimbursement for an insurance company. my approach consist of the 4 types of data analytics. I will be sharing the solution in 2 parts.

Methodology

Data Investigation
Exploratory data analysis
Statistical Analysis
Data Transformation
Adversarial validation
Feature Engineering
Machine Learning model

I will be covering 1–3 methodology in this section.

Data Investigation

I started the project by investigating the dataset by understanding the rows and columns of the dataset, check if there is any missing values in the data, check the data types of each features. The data types with incorrect format is changed.

There is no missing values in the dataset.

Descriptive Analysis ( Exploratory Data Analysis)

In this section, we will use data visualization to explore our dataset. The data will be explored using Uni-Variate, Bi-Variate, and Multi-Variate Analysis. The structure will be question — visual— observation.

Uni-variate Analysis (Comparing 1 variable at a time)

Question 1

What is the percentage of OUTCOME?

Observation

57% of the claims are rejected and 42.3% of the claims are accepted.

Question 2

What is the gender ratio of the clients?

Observation

Males account for 62.2% of clients, while females account for 37.8%.

Question 3

Which age group do the majority of the clients belong to?

Observation

The majority of the clients are over the age of 40.

Question 4

Driving Experience of Clients

Observation

The majority of our clients have 20–29 years of driving experience, while the fewest have 30+ years.

Question 5

Clients’ educational level ratio

Observation

44.4% of the clients have a high school diploma, 29.7% have a university diploma, and 25.9% have no education.

Question 6

Clients’ income level ratio.

Observation

We have 48.8% of clients who are upper class, 23.3% who are working class, 14.0 who are middle class, and 13.8 who are poor.

Question 7

The Most Common Vehicle Types

Observation

Sports car > Sedan > HatchBack > SUV

Question 8

The Distribution of our Numeric Features

Observation

The distribution appears to be normal.

Bi-variate (Comparing 2 variables at a time)

Question 9

What is the gender ratio in terms of outcome?

Observation

Female claims are accepted at 16% and rejected at 22%.

26% of male claims are accepted, while 36% are denied.

Question 10

What is the age group ratio in relation to the outcome?

Observation

The Age Group with Outcome appears to be balanced across various Age Groups.

Question 11

Outcome based on social and economic status.

Observation

Each social economic status has a similar distribution of the Rejected and Accepted.

Question 12

Is there a correlation between credit score and annual mileage

Observation

We can see a weakly negative correlation between them.

Statistical Analysis

In this section, we’ll use the Chi-Square method to examine how different category variables relate to the OUTCOME. The data were transformed but a better explanation will be showing at part 2 of the article.

Note: Finding relationships between categorical data through correlation is one of the pitfalls of data science.

Create our hypothesis

H0 — There was no significant difference between the feature and the OUTCOME class.

H1 — The checked feature differs significantly from the OUTCOME class.

The data is transformed and a chi square model from statsmodel is used.

Conclusion

Only Gender and Driving Experience have a significant difference with the OUTCOME class and will be a good categorical predictor, according to our findings.

You can find the notebook link — Notebook

Ending note

Stayed tuned!!! to the 2nd article, where i will be showing my approach of building a machine learning model, that is ranked 5th position out 1008 registered participants. I will be covering predictive and prescriptive analysis.

References

Contact

Vehicle Insurance Prediction (Part 1)

Written by raheem nasirudeen