Lecture 4 Flashcards
Describe the role of regression model in insurance pricing
Regression models like generalized linear models (GLMs) or deep learning models are used in insurance pricing to predict insurance claims and set prices based on policyholder infromation
What are covariates in insurance pricing?
Covariates in insurance pricing are various factors such as car characteristics, driver infromation, insurance contract details, and location that are considered to be true risk factor or rating factros
Explain the concept of fairness in machine learning
Focuses on defining fairness, creating fair decision- mkaing tools, mitigating biases and setting regulation. Includes individual fairness and group fairness.
How can deep hedging be applied in a standrad financial modet setup
By using a neural network based strategy to replace traditional Delta hedging.
What does AI encompass beyond technology?
People, Structures, organizations and physical systems and tasks.
What considerations are important in regression models for insurance pricing ?
Ensuring auto-calibration to avoid cross- financing and using strictly consistent loss functions.
High cardinality categorical features and factors and factors like deductibles and bonus-malus systems also require special attention.
Define individual fairness and groups fairness in the context of fairness criteria
Individual fairness refers to fairness through unawareness, awareness, and counter factual fairness.
Group fariness includes demographic parity, equalized odds and predictive parity.
Differentiate between legal and illigal discrimination in insurance
Discriminations is inherit in insurances but mut be differented from illegal discriminations such as gender, color, and so on.
How is proxy discrimination addressed in insurance pricing?
The challanges is to price without discriminating based on protected attributes, even indirectly through associated risk -Rating factors
DFIP stands for what? and what does it do?
Discimination free insurance policy. A concept that focuses on eliminating proxy discriminations in insurance pricing.
What is the relationship between fairness and discriminations?
they are seperate concepts. by pre processing and post processing one can align them.
what is the ongoing challang ein the insruance sector regarding fariness and risk assessment?
Ensuring fairness while maintaing accuracy in risk assesment is a complex, ongoing challange in the insruance sector.
