Construction of insurance scoring system using regression models

Abstract

This study suggests the regression models of Lognormal, Normal and Gamma for the construction of an insurance scoring system. Comparison between Lognormal, Normal and Gamma regression models were also carried out, and the comparison were centered upon three main elements; fitting procedures, parameter estimates and structure of scores. The main advantage of utilizing a scoring system is that the system may be used by insurers to differentiate between good and bad insureds and thus allowing the profitability of insureds to be predicted.