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Black-box guided generalised linear model building with non-life pricing applications
Stockholm University, Faculty of Science, Department of Mathematics.ORCID iD: 0000-0001-7235-384x
Number of Authors: 22024 (English)In: Annals of Actuarial Science, ISSN 1748-4995, E-ISSN 1748-5002, Vol. 18, no 3, p. 675-691Article in journal (Refereed) Published
Abstract [en]

The paper introduces a method for creating a categorical generalized linear model (GLM) based on information extracted from a given black-box predictor. The procedure for creating the guided GLM is as follows: For each covariate, including interactions, a covariate partition is created using partial dependence functions calculated based on the given black-box predictor. In order to enhance the predictive performance, an auto-calibration step is used to determine which parts of each covariate partition should be kept, and which parts should be merged. Given the covariate and interaction partitions, a standard categorical GLM is fitted using a lasso penalty. The performance of the proposed method is illustrated using a number of real insurance data sets where gradient boosting machine (GBM) models are used as black-box reference models. From these examples, it is seen that the predictive performance of the guided GLMs is very close to that of the corresponding reference GBMs. Further, in the examples, the guided GLMs have few parameters, making the resulting models easy to interpret. In the numerical illustrations techniques are used to, e.g., identify important interactions both locally and globally, which is essential when, e.g., constructing a tariff.

Place, publisher, year, edition, pages
2024. Vol. 18, no 3, p. 675-691
Keywords [en]
auto-calibration, black-box models, categorical GLM, feature extraction, regularisation
National Category
Probability Theory and Statistics
Identifiers
URN: urn:nbn:se:su:diva-240855DOI: 10.1017/S1748499524000265ISI: 001370873700001Scopus ID: 2-s2.0-85211630562OAI: oai:DiVA.org:su-240855DiVA, id: diva2:1944951
Available from: 2025-03-17 Created: 2025-03-17 Last updated: 2025-03-17Bibliographically approved

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  • apa
  • ieee
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  • de-DE
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  • en-US
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  • nn-NO
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Output format
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  • asciidoc
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