Auto Insurance Risk Scoring with AutoML

Auto Insurance Risk Scoring with AutoML
Selin Nur Barlak 05.12.2020
AutoMLB2MetricRisk ScoringPredictive AnalyticsGBM ModelingAuto Insurance Risk EngineMachine LearningAutomated Machine Learning

In every business, from the small corner store to the large manufacturer, there are common challenges with insurance, claims, and risk in general. Buildings can be damaged by fire, someone could slip and fall, vehicle accidents often occur, or losses can occur as a result of defective products. Risk management steps in here. Our business ventures encounter many risks that can affect their survival and growth. As a result, it is important to understand the basic principles of risk management and how it can be used to help mitigate the effects of risks on business entities.

What is Risk Management?


Risk analysis and risk management is a process that allows individual risk events and overall risk to be understood and managed proactively, optimizing success by minimizing threats and maximizing opportunities and outcomes.

Risk management encompasses the identification, analysis, and response to risk factors that form part of the life of a business. Effective risk management means attempting to control, as much as possible, future outcomes by acting proactively rather than reactively. Therefore, effective risk management offers the potential to reduce both the possibility of a risk occurring and its potential impact.

The extent of risk can be expressed as follows:

Risk = Probability x Severity

Probability is the likelihood of an event occurring, and severity is the extent and cost of the resulting loss. In broad terms, risks may be broken down into two categories:

Pure Risk - Risks where the possible outcomes are either a loss or no loss. It includes things like fire loss, a building being burglarized, having an employee involved in a motor vehicle accident, etc. Speculative Risk - Risks where the possible outcomes are either a loss, profit, or status quo. It includes things like stock market investments and business decisions such as new product lines, new locations, etc.


Importance of Risk Management

1- The first impression: Home page

For a business, assessment, and management of risks is the best way to prepare for eventualities that may come in the way of progress and growth. When a business evaluates its plan for handling potential threats and then develops structures to address them, it improves its odds of becoming a successful entity. In addition, progressive risk management ensures the risks of a high priority are dealt with as aggressively as possible. Moreover, the management will have the necessary information that they can use to make informed decisions and ensure that the business remains profitable.



Risk Management Process

1. Identify existing risks

Risk identification mainly involves brainstorming. A business gathers its employees together so that they can review all the various sources of risk. The next step is to arrange all the identified risks in order of priority. Because it is not possible to mitigate all existing risks, prioritization ensures that those risks that can affect business significantly are dealt with more urgently.


2. Assess the risks

In many cases, problem resolution involves identifying the problem and then finding an appropriate solution. However, prior to figuring out how best to handle risks, a business should locate the cause of the risks by asking the question, “What caused such a risk and how could it influence the business?”


3. Develop an appropriate response

Once a business entity is set on assessing likely remedies to mitigate identified risks and prevent their recurrence, it needs to ask the following questions: What measures can be taken to prevent the identified risk from recurring? In addition, what is the best thing to do if it does recur?


4. Develop preventive mechanisms for identified risks

Here, the ideas that were found to be useful in mitigating risks are developed into a number of tasks and then into contingency plans that can be deployed in the future. If risks occur, the plans can be put into action.


Risk Management For Insurance Industry

One of the insurance company’s core competencies is providing customer service to those who need to submit a claim. If customers consistently have poor customer service experiences, they’re likely to share their stories on social media, tarnish the company’s reputation, and the company will fall behind the competition. According to a recent study, the National Association of Insurance Commissioners (NAIC), core risks in the insurance business include “underwriting, credit, market, operational, liquidity risks, etc.” Given this wide variety of concerns, there is a tremendous opportunity for risk management in insurance companies to make a positive impact.

To return to the customer service example above, let’s look at how enterprise risk management could help. Risk management involves identifying, assessing, and mitigating risk. The beauty of a well-implemented risk management program is it’s built on a foundation of standardized risk assessments to help companies prioritize their risk based on its potential impact. Naturally, this process will surface risks that will impact the business’s core competencies. For an insurance company, customer service would inevitably come to the forefront of a risk assessment. To address this risk, the insurance company could take steps to integrate incident management and risk management. Most companies have a way to track incidents like customer complaints, but many do not have a way of categorizing, prioritizing, and escalating incidents across teams. Risk management in the insurance business helps centralize and identify trends in customer feedback. From there, insurance companies can implement controls to address those trends, such as hiring more customer service reps to resolve long wait times or implementing call-screenings to identify less-than-helpful interactions. Improving customer service is only one example of how insurance companies can leverage risk management. A fully integrated enterprise risk management program can help insurance companies develop proactive mitigation activities to protect the core of their business.

Thanks to the AutoML technology offered by B2Metric, you can do all these steps in the easiest and fastest way, with accuracy. B2Metric automates the data preparation, feature engineering, and model selection process for you with supervised, unsupervised, semi-supervised algorithms.

For details see the B2Metric Hunter Insurance Risk Assessment Engine

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