About This Event
Elastic nets are an innovation on traditional approaches to actuarial pricing models. GLMs have been a standard tool for building insurance pricing models for the last two decades. They have some known limitations, such as granting full credibility to the parameter estimates and being prone to overfitting on segments where data is sparse. Elastic nets introduce a penalty term, the effect of which is to shrink the model parameters toward or to zero. This has the combined effect of limiting the model’s response to outliers and eliminating variables completely from the model when they lack statistical stability. The result is often a more accurate pricing model.
