Predicting Car Insurance Frauds
Project Proposal
Francesco Buzzi Poongkundran Thamaraiselvan
b00804356@essec.edu b00798732@essec.edu
Introduction
Vehicle safety is a remarkably significant field of research, not
only for automotive industry, but also for insurance companies. It
is in fact, of considerable importance for them to avoid
compensating damages, especially when dealing with fraudulent
claims. False claims represent a vast and costly problem for these
firms and prevent to repaid them it is absolutely crucial not to end
up with financial losses over billions of dollars yearly.
Thus, being able to predict whether a claim is legitimate or not is
a fundamental task that might be tackled through machine
learning and use of data. Quick and automated process of
discovering a fraud could give an essential advantage to insurance
companies to fight against fraudsters, replacing traditional and
complex methods – that usually leads to inaccurate results.
Moreover, similar approaches can be used in other case of frauds’
detection, for example in bank transaction or online shopping.
Methodology
The dataset we have decided to use is publicly available and can
be found on Kaggle. Each observation represents a claim, with
information about the day, the vehicle, the people involved, the
policy and the accident itself. In addition, each observation is
labeled by a binary value, fraud and not fraud (1 and 0
respectively), that will be our target variable.
We plan to divide our project into three main parts: the first part
will be about exploratory analytics – to visualize the data and
better understand features; the second will consist in using simple
machine learning models (Logistic Regression, Regularization,
Feature Selection, Classification Trees) to understand which
features might be more influential for predicting and their
relationship with the target variable. Eventually, we will develop
our final model, exploiting Random Forest or Gradient Boosted
Trees, to make the predictions and evaluate the best fit.
Moreover, as we are dealing with a dataset with skewed class
distribution – there are far more observations labelled as not
Roshan Velpula
b00802760@essec.edu
fraud than fraud – we might consider specific techniques for
tackling this type of sets, like under-sampling – that reduces the
training set by removing some not fraud observation – and
understand whether they might be useful or not.
Evaluation
The evaluations will be made on few final models, using a test set
and considering confusion matrices and its associated measures
(accuracy, F-measure, etc.) and ROC curves. Furthermore, we
will consider different thresholds – probably above the standard
0.5 for classification tasks – that might be more efficient in
correctly classifying more frauds, sacrificing some correct not
fraud labelled data.
References
[1] Andrea Dal Pozzolo. Adaptive machine learning for credit card fraud
detection.
[2] Najmeddine Dhieb, Hakim Ghazzai, Hichem Besbes, and Yehia
Massoud. Extreme gradient boosting machine learning algorithm for
safe auto insurance operations. In 2019 IEEE international conference
on vehicular electronics and safety (ICVES), pages 1–5. IEEE, 2019.
[3] MOHAMED Hanafy and Ruixing Ming. Using machine learning
models to compare various resampling methods in predicting insurance
fraud. Journal of Theoretical and Applied Information Technology,
99(12), 2021.
[4] Jesus M Perez, Javier Muguerza, Olatz Arbelaitz, Ibai Gurrutxaga, and
Jose I Martın. Consolidated tree classifier learning in a car insurance
fraud detection domain with class imbalance. In International
Conference on Pattern Recognition and Image Analysis, pages 381–389.
Springer, 2005.
[5] Yibo Wang and Wei Xu. Leveraging deep learning with lda-based text
analytics to detect automobile insurance fraud. Decision Support
Systems, 105:87–95, 2018.
[6] Meryem Yankol-Schalck. The value of cross-data set analysis for
automobile insurance fraud detection. Research in International
Business and Finance, 63:101769, 2022.