Premium
Detection of Automobile Insurance Fraud With Discrete Choice Models and Misclassified Claims
Author(s) -
Artís Manuel,
Ayuso Mercedes,
Guillén Montserrat
Publication year - 2002
Publication title -
journal of risk and insurance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.055
H-Index - 63
eISSN - 1539-6975
pISSN - 0022-4367
DOI - 10.1111/1539-6975.00022
Subject(s) - automobile insurance , insurance fraud , logistic regression , actuarial science , discrete choice , estimation , econometrics , business , computer science , economics , machine learning , management
The insurance industry is concerned with the detection of fraudulent behavior. The number of automobile claims involving some kind of suspicious circumstance is high and has become a subject of major interest for companies. This article demonstrates the performance of binary choice models for fraud detection and implements models for misclassification in the response variable. A database from the Spanish insurance market that contains honest and fraudulent claims is used. The estimation of the probability of omission provides an estimate of the percentage of fraudulent claims that are not detected by the logistic regression model.