Predictive Modeling Applications in Actuarial Science

Chapter 1 - Predictive Modeling in Actuarial Science


Edward W. Frees | University of Wisconsin - Madison

Richard A. Derrig | Opal Consulting LLC

Glenn Meyers

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Predictive modeling involves the use of data to forecast future events. It relies on capturing relationships between explanatory variables and the predicted variables from past occurrences, and exploiting them to predict future outcomes. The goal of this two-set volume is to build on the training of actuaries by developing the fundamentals of predictive modeling and providing corresponding applications in actuarial science, risk management and insurance. This introduction sets the stage for these volumes by describing the conditions that led to the need for predictive modeling in the insurance industry. It then traces the evolution of predictive modeling that led to the current statistical methodologies that prevail in actuarial science today.