Valid Model-Free Prediction of Future Insurance Claims. Issue 4 (29th November 2021)

• Record Type: Journal Article
• Authors: Hong, Liang; Martin, Ryan
• Is Part Of: North American actuarial journal. Volume 25:Issue 4(2021)
• Page Start: 473
• Page End: 483
• Publication Date: 2021-11-29
• Subjects: Life insurance -- Research -- North America -- Periodicals; Actuarial science -- North America -- Periodicals; Web sites; Electronic journals; 368.010973
• DOI: 10.1080/10920277.2020.1802599
• Languages: English
• ISSNs: 2325-0453

Abstract

Abstract : Bias resulting from model misspecification is a concern when predicting insurance claims. Indeed, this bias puts the insurer at risk of making invalid or unreliable predictions. A method that could provide provably valid predictions uniformly across a large class of possible distributions would effectively eliminate the risk of model misspecification bias. Conformal prediction is one such method that can meet this need, and here we tailor that approach to the typical insurance application and show that the predictions are not only valid but also efficient across a wide range of settings.