Response variable for claim frequency model

Discussion in 'SP8' started by Thunder, Mar 20, 2011.

  1. Thunder

    Thunder Member

    Page 23 of the GLM chapter says the response variable of the claim frequency model is the number of claims.

    So I would presume that if for a given row i I had 1 claim in a six month period than Yi = 1.

    but, when I look at the linear predictor I have X.B where neither the Xs or the Bs appear to adjust for the fact I am only looking at a six month period (B is a one dimensional matrix, independent of i) , thus my µi is number of claims in one year, claim frequency; not number of claims.

    so if:
    Yi = E[Yi] + ε = ui + ε
    I have my Yi as a six monthly rate, and ui as an annual rate, which does not make much sense to me.


    ...or is it the case that X is not a matrix of 1s and 0s, as shown in the examples, and row Xi would read: 1/2 male, 0 female, 1/2 age 35, 0 age 36, etc?
     
    Last edited by a moderator: Mar 23, 2011
    Thunder, Mar 20, 2011
    #1
  2. Duncan Brydon

    Duncan Brydon ActEd Tutor Staff Member

    Usually “response variable” means the Y variable, so we could have a claim frequency model with: Y= response variable = claim frequency.

    However, the data collected will be claim numbers and so some practitioners refer to “number of claims” as the response variable when building a claim frequency model. This alternative usage is reflected in the Core Reading on page 23.

    In the example on page 3 of Chapter 16, Y is claim frequency and not the number of claims. (I think this is one of the examples you were referring to and hopefully this helps to clarify it.)

    I hope this helps
    Duncan
     
    Duncan Brydon, Mar 25, 2011
    #2

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