Insurance Premium Default Propensity Prediction
Tobi Ilesanmi
11/5/2020
knitr::opts_chunk$set(echo = TRUE)1. PROJECT OBJECTIVE
Insurance provides financing, leverage, cushion against possible eventuality. It is an arrangement by which the Company undertakes to provide a guarantee of compensation for specified loss, damage, illness or death in return by paymnent of a specified premium.
Premium paid by the customer is the major revenue source for insurance companies. Default in premium payments results in significant revenue losses and hence insurance companies would like to know upfront which type of customers would default premium payments. The objective of this project is to predict the probability that a customer will default the premium payment, so that the insurance agent can proactively reach out to the policy holder to follow up for the payment of premium.
Problem Statement: *The project ultimate focus is to predict if the current customer(s) will Default in Future Payments
The Project will include the following: * Visual inspection of data (rows, columns, descriptive details) * Understanding of attributes (variable info, renaming if required) * Univariate analysis (distribution and spread for every continuous attribute, distribution of the data in categories for categorical ones) * Bivariate analysis (relationship between different variables, correlations) * Building a model that can predict the likelihood of a customer defaulting on premium payments (Who is likely to default) * Identifing the factors that drive higher default rate (Are there any characteristics of the customers who are likely to default?) * Propose a strategy for reducing default rates by using the model and other insights from the analysis (What should be done to reduce the default rates?)
2.1 The Data
The dataset contains the following details collected well over ten years on 79, 854 Policy Holders. (The exact number of years will be decided as we gain better understanding of the data) * id: Unique customer ID perc_premium_paid_by_cash_credit: What % of the premium was paid by cash payments? * age_in_days: age of the customer in days * Income: Income of the customer * Marital Status: Married/Unmarried, Married (1), unmarried (0) * Veh_owned: Number of vehicles owned (1-3) * Count_3-6_months_late: Number of times premium was paid 3-6 months late * Count_6-12_months_late: Number of times premium was paid 6-12 months late * Count_more_than_12_months_late: Number of times premium was paid more than 12 months late * Risk_score: Risk score of customer (similar to credit score) * No_of_dep: Number of dependents in the family of the customer (1-4) * Accommodation: Owned (1), Rented (0) no_of_premiums_paid: Number of premiums paid till date * sourcing_channel: Channel through which customer was sourced * residence_area_type: Residence type of the customer * premium : Total premium amount paid till now * default: Y variable - 0 indicates that customer has defaulted the premium and 1 indicates that customer has not defaulted
3. Install Packages
library(car)## Loading required package: carDatalibrary(MASS)
library(ggplot2)
library(gridExtra)
library(caTools)
library(e1071)
library(ROCR)
library(InformationValue)
library(class)
library(knitr)
library(corrplot)## corrplot 0.84 loadedlibrary(dataframeexplorer)3. Exploratory Data Analysis
3.1 Import Data
3.1.1 Set Working Directory
setwd("~/Great Learning/Capstone Project")3.1.2 Import and Read the Dataset
library(readxl)
InsuranceDataset <- read_excel("Insurance Premium Default-Dataset.xlsx")
View(InsuranceDataset)head(InsuranceDataset)## # A tibble: 6 x 17
## id perc_premium_pa~ age_in_days Income `Count_3-6_mont~ `Count_6-12_mon~
## <dbl> <dbl> <dbl> <dbl> <dbl> <dbl>
## 1 1 0.317 11330 90050 0 0
## 2 2 0 30309 156080 0 0
## 3 3 0.015 16069 145020 1 0
## 4 4 0 23733 187560 0 0
## 5 5 0.888 19360 103050 7 3
## 6 6 0.512 16795 113500 0 0
## # ... with 11 more variables: Count_more_than_12_months_late <dbl>, `Marital
## # Status` <dbl>, Veh_Owned <dbl>, No_of_dep <dbl>, Accomodation <dbl>,
## # risk_score <dbl>, no_of_premiums_paid <dbl>, sourcing_channel <chr>,
## # residence_area_type <chr>, premium <dbl>, default <dbl>tail(InsuranceDataset)## # A tibble: 6 x 17
## id perc_premium_pa~ age_in_days Income `Count_3-6_mont~ `Count_6-12_mon~
## <dbl> <dbl> <dbl> <dbl> <dbl> <dbl>
## 1 79848 0.009 21545 133140 0 0
## 2 79849 0.249 25555 64420 0 0
## 3 79850 0.003 16797 660040 1 0
## 4 79851 0.012 24835 227760 0 0
## 5 79852 0.19 10959 153060 1 0
## 6 79853 0 19720 324030 0 0
## # ... with 11 more variables: Count_more_than_12_months_late <dbl>, `Marital
## # Status` <dbl>, Veh_Owned <dbl>, No_of_dep <dbl>, Accomodation <dbl>,
## # risk_score <dbl>, no_of_premiums_paid <dbl>, sourcing_channel <chr>,
## # residence_area_type <chr>, premium <dbl>, default <dbl>str(InsuranceDataset)## tibble [79,853 x 17] (S3: tbl_df/tbl/data.frame)
## $ id : num [1:79853] 1 2 3 4 5 6 7 8 9 10 ...
## $ perc_premium_paid_by_cash_credit: num [1:79853] 0.317 0 0.015 0 0.888 0.512 0 0.994 0.019 0.018 ...
## $ age_in_days : num [1:79853] 11330 30309 16069 23733 19360 ...
## $ Income : num [1:79853] 90050 156080 145020 187560 103050 ...
## $ Count_3-6_months_late : num [1:79853] 0 0 1 0 7 0 0 0 0 0 ...
## $ Count_6-12_months_late : num [1:79853] 0 0 0 0 3 0 0 0 0 0 ...
## $ Count_more_than_12_months_late : num [1:79853] 0 0 0 0 4 0 0 0 0 0 ...
## $ Marital Status : num [1:79853] 0 1 0 1 0 0 0 0 1 1 ...
## $ Veh_Owned : num [1:79853] 3 3 1 1 2 1 3 3 2 3 ...
## $ No_of_dep : num [1:79853] 3 1 1 1 1 4 4 2 4 3 ...
## $ Accomodation : num [1:79853] 1 1 1 0 0 0 1 0 1 1 ...
## $ risk_score : num [1:79853] 98.8 99.1 99.2 99.4 98.8 ...
## $ no_of_premiums_paid : num [1:79853] 8 3 14 13 15 4 8 4 8 8 ...
## $ sourcing_channel : chr [1:79853] "A" "A" "C" "A" ...
## $ residence_area_type : chr [1:79853] "Rural" "Urban" "Urban" "Urban" ...
## $ premium : num [1:79853] 5400 11700 18000 13800 7500 3300 20100 3300 5400 9600 ...
## $ default : num [1:79853] 1 1 1 1 0 1 1 1 1 1 ...3.2 Lets Rename Columns with dplyr::rename ()
- We will rename the columns to shorter names we can easiy work with
- Lets first get the Column Names
colnames(InsuranceDataset)## [1] "id" "perc_premium_paid_by_cash_credit"
## [3] "age_in_days" "Income"
## [5] "Count_3-6_months_late" "Count_6-12_months_late"
## [7] "Count_more_than_12_months_late" "Marital Status"
## [9] "Veh_Owned" "No_of_dep"
## [11] "Accomodation" "risk_score"
## [13] "no_of_premiums_paid" "sourcing_channel"
## [15] "residence_area_type" "premium"
## [17] "default"- Let’s rename the column names
names(InsuranceDataset) [names(InsuranceDataset) == "perc_premium_paid_by_cash_credit"] <-"Perc_Premiumcash"
names(InsuranceDataset) [names(InsuranceDataset) == "age_in_days"] <-"Age"
names(InsuranceDataset) [names(InsuranceDataset) == "Count_3-6_months_late"] <-"Count3-6"
names(InsuranceDataset) [names(InsuranceDataset) == "Count_6-12_months_late"] <-"Count6_12"
names(InsuranceDataset) [names(InsuranceDataset) == "Count_more_than_12_months_late"] <-"Count12andmore"
names(InsuranceDataset) [names(InsuranceDataset) == "Marital Status"] <-"Marital_Status"
names(InsuranceDataset) [names(InsuranceDataset) == "No_of_dep"] <-"Dependents"
names(InsuranceDataset) [names(InsuranceDataset) == "risk_score"] <-"Risk_Score"
names(InsuranceDataset) [names(InsuranceDataset) == "no_of_premiums_paid"] <-"Premiums_Paid"
names(InsuranceDataset) [names(InsuranceDataset) == "sourcing_channel"] <-"Sourcing_Channel"
names(InsuranceDataset) [names(InsuranceDataset) == "residence_area_type"] <-"Residence"
names(InsuranceDataset) [names(InsuranceDataset) == "premium"] <-"Premium"
names(InsuranceDataset) [names(InsuranceDataset) == "default"] <-"Default"- Having changed the column names, lets check them
colnames(InsuranceDataset)## [1] "id" "Perc_Premiumcash" "Age" "Income"
## [5] "Count3-6" "Count6_12" "Count12andmore" "Marital_Status"
## [9] "Veh_Owned" "Dependents" "Accomodation" "Risk_Score"
## [13] "Premiums_Paid" "Sourcing_Channel" "Residence" "Premium"
## [17] "Default"3.3 Missing Value Treatment
- Lets check if there is any missing value in the dataset
colSums(is.na(InsuranceDataset))## id Perc_Premiumcash Age Income
## 0 0 0 0
## Count3-6 Count6_12 Count12andmore Marital_Status
## 0 0 0 0
## Veh_Owned Dependents Accomodation Risk_Score
## 0 0 0 0
## Premiums_Paid Sourcing_Channel Residence Premium
## 0 0 0 0
## Default
## 0- There are no missing values
3.4 Lets check the summary of the dataset so, we can understand the type of transformation we need to make in our dataset
summary (InsuranceDataset)## id Perc_Premiumcash Age Income
## Min. : 1 Min. :0.0000 Min. : 7670 Min. : 24030
## 1st Qu.:19964 1st Qu.:0.0340 1st Qu.:14974 1st Qu.: 108010
## Median :39927 Median :0.1670 Median :18625 Median : 166560
## Mean :39927 Mean :0.3143 Mean :18847 Mean : 208847
## 3rd Qu.:59890 3rd Qu.:0.5380 3rd Qu.:22636 3rd Qu.: 252090
## Max. :79853 Max. :1.0000 Max. :37602 Max. :90262600
## Count3-6 Count6_12 Count12andmore Marital_Status
## Min. : 0.0000 Min. : 0.00000 Min. : 0.00000 Min. :0.0000
## 1st Qu.: 0.0000 1st Qu.: 0.00000 1st Qu.: 0.00000 1st Qu.:0.0000
## Median : 0.0000 Median : 0.00000 Median : 0.00000 Median :0.0000
## Mean : 0.2484 Mean : 0.07809 Mean : 0.05994 Mean :0.4987
## 3rd Qu.: 0.0000 3rd Qu.: 0.00000 3rd Qu.: 0.00000 3rd Qu.:1.0000
## Max. :13.0000 Max. :17.00000 Max. :11.00000 Max. :1.0000
## Veh_Owned Dependents Accomodation Risk_Score
## Min. :1.000 Min. :1.000 Min. :0.0000 Min. :91.90
## 1st Qu.:1.000 1st Qu.:2.000 1st Qu.:0.0000 1st Qu.:98.83
## Median :2.000 Median :3.000 Median :1.0000 Median :99.18
## Mean :1.998 Mean :2.503 Mean :0.5013 Mean :99.07
## 3rd Qu.:3.000 3rd Qu.:3.000 3rd Qu.:1.0000 3rd Qu.:99.52
## Max. :3.000 Max. :4.000 Max. :1.0000 Max. :99.89
## Premiums_Paid Sourcing_Channel Residence Premium
## Min. : 2.00 Length:79853 Length:79853 Min. : 1200
## 1st Qu.: 7.00 Class :character Class :character 1st Qu.: 5400
## Median :10.00 Mode :character Mode :character Median : 7500
## Mean :10.86 Mean :10925
## 3rd Qu.:14.00 3rd Qu.:13800
## Max. :60.00 Max. :60000
## Default
## Min. :0.0000
## 1st Qu.:1.0000
## Median :1.0000
## Mean :0.9374
## 3rd Qu.:1.0000
## Max. :1.0000- The id is just the serial number of each policy holder, from no 1 (min) to number 79,853 (Max)
- Perc_Premiumcash, this is the % of the premium made by cash payment; the 1st Quartile is 3.4%, the Median is 16.7%, the mean is 31.4% and the 3rd Quartile is 58.3%, hence 75% of the policy holders are less than 58.3%, meaning lesser policy holders make their premium by cash.
- Age in days, seems we can’t make meaning of it yet, until we convert it to age in years
- The min income is 24,030 USD, median is 166,560 USD, and the max is 90,262,600 USD.
- Count3-6; the number of times premium was paid 3-6 months late; 3rd Quartile is 0.000, meaning most policy holders pay up in time, but a few of them do delay, with max up to 13 times
- Count6_12 ; the number of times premium was paid 6-12 months late; although 3rd Quartile is 0.000, yet max is 17, meaning most policy holders pays their premium on time, but few outliers still delay up to 6-12 months
- Count12andmore; number of times premium was paid, more than 12 months is maximally 11 times.
- Marital_Status; this will be changed to factor for us to make more sense of the data
- Dependents; the media number of dependents per policy holder is 3 and the max is 4
- Risk_Score is high for most clients, the min is 91.9, the median is 99.18, meaning most clients are nearer to the max than the minimum, as the mas is 99.89
- Sourcing_Channel; channel through which the customer was sourced will be converted to factor so that we can make more sense of the data
- Veh_Owned; max is 3 and minimum is 1, hence this is likely to be Vehicle insurance, since all policy vehicle own at least 1 vehicle#
- Accommodation: this will be converted to factor, so we can make more sense of the data
- Premiums_Paid; no of premium paid till date; min is 2, median is 10 and max is 60. This may help understand the duration of this data collection, It means it will definitely be over 5 years, if it is monthly premium
- Residence: we will change this to factor to help us understand the data better
- Premium; total premium paid till date, min is 1,200, mean is 7,500 and max is 60,000
- Default: this is the variable of interest and it will be changed to factor to help gain better insight into the data.
3.5 Lets now Transform the Age Column Values from days to years
- We will create a new column of Age in Years from the original Age in Days column
InsuranceDataset$AgeinYears <- InsuranceDataset$Age /365- Having created another column called AgeinYears, we can see in the Global Environment that the variables have increased from 17 to 18.
- We will go ahead to remove the “Age” column (Column 3) later on.
3.6. Lets also transform the Income Variable, by creating a new variable called Income Class
- We will create the income class column using the cut function on the current Income Variable.
InsuranceDataset$IncomeClass <- cut(InsuranceDataset$Income, breaks = c(0, 150000, 250000, 90262600), labels = c("low","middle","high"))- We have created 3 income class (low, middle and high) within a new variable called IncomeClass
- We now have 19 variables up from 18.
- Lets check the dimension of the new dataset
dim(InsuranceDataset)## [1] 79853 19summary(InsuranceDataset)## id Perc_Premiumcash Age Income
## Min. : 1 Min. :0.0000 Min. : 7670 Min. : 24030
## 1st Qu.:19964 1st Qu.:0.0340 1st Qu.:14974 1st Qu.: 108010
## Median :39927 Median :0.1670 Median :18625 Median : 166560
## Mean :39927 Mean :0.3143 Mean :18847 Mean : 208847
## 3rd Qu.:59890 3rd Qu.:0.5380 3rd Qu.:22636 3rd Qu.: 252090
## Max. :79853 Max. :1.0000 Max. :37602 Max. :90262600
## Count3-6 Count6_12 Count12andmore Marital_Status
## Min. : 0.0000 Min. : 0.00000 Min. : 0.00000 Min. :0.0000
## 1st Qu.: 0.0000 1st Qu.: 0.00000 1st Qu.: 0.00000 1st Qu.:0.0000
## Median : 0.0000 Median : 0.00000 Median : 0.00000 Median :0.0000
## Mean : 0.2484 Mean : 0.07809 Mean : 0.05994 Mean :0.4987
## 3rd Qu.: 0.0000 3rd Qu.: 0.00000 3rd Qu.: 0.00000 3rd Qu.:1.0000
## Max. :13.0000 Max. :17.00000 Max. :11.00000 Max. :1.0000
## Veh_Owned Dependents Accomodation Risk_Score
## Min. :1.000 Min. :1.000 Min. :0.0000 Min. :91.90
## 1st Qu.:1.000 1st Qu.:2.000 1st Qu.:0.0000 1st Qu.:98.83
## Median :2.000 Median :3.000 Median :1.0000 Median :99.18
## Mean :1.998 Mean :2.503 Mean :0.5013 Mean :99.07
## 3rd Qu.:3.000 3rd Qu.:3.000 3rd Qu.:1.0000 3rd Qu.:99.52
## Max. :3.000 Max. :4.000 Max. :1.0000 Max. :99.89
## Premiums_Paid Sourcing_Channel Residence Premium
## Min. : 2.00 Length:79853 Length:79853 Min. : 1200
## 1st Qu.: 7.00 Class :character Class :character 1st Qu.: 5400
## Median :10.00 Mode :character Mode :character Median : 7500
## Mean :10.86 Mean :10925
## 3rd Qu.:14.00 3rd Qu.:13800
## Max. :60.00 Max. :60000
## Default AgeinYears IncomeClass
## Min. :0.0000 Min. : 21.01 low :33495
## 1st Qu.:1.0000 1st Qu.: 41.02 middle:25779
## Median :1.0000 Median : 51.03 high :20579
## Mean :0.9374 Mean : 51.63
## 3rd Qu.:1.0000 3rd Qu.: 62.02
## Max. :1.0000 Max. :103.02- We now have 19 variables and the Income Class variable is clearly seen
- About 42% of the policy holders are within the low income bracket, 32% within the middle income class and 26% within the high income class
3.7 Lets convert IncomeClass, Marital Status, Accomodation, SourcingChannel, Residence and Default to Factor
InsuranceDataset$IncomeClass <- as.factor(InsuranceDataset$IncomeClass)
InsuranceDataset$Marital_Status <- as.factor(InsuranceDataset$Marital_Status)
InsuranceDataset$Accomodation <- as.factor(InsuranceDataset$Accomodation)
InsuranceDataset$Sourcing_Channel <- as.factor(InsuranceDataset$Sourcing_Channel)
InsuranceDataset$Residence <- as.factor(InsuranceDataset$Residence)
InsuranceDataset$Default <- as.factor(InsuranceDataset$Default)- Having converted these variables to factor, lets now check the structure and the summary of our dataset again, so we that we can make more sense of the data
str(InsuranceDataset)## tibble [79,853 x 19] (S3: tbl_df/tbl/data.frame)
## $ id : num [1:79853] 1 2 3 4 5 6 7 8 9 10 ...
## $ Perc_Premiumcash: num [1:79853] 0.317 0 0.015 0 0.888 0.512 0 0.994 0.019 0.018 ...
## $ Age : num [1:79853] 11330 30309 16069 23733 19360 ...
## $ Income : num [1:79853] 90050 156080 145020 187560 103050 ...
## $ Count3-6 : num [1:79853] 0 0 1 0 7 0 0 0 0 0 ...
## $ Count6_12 : num [1:79853] 0 0 0 0 3 0 0 0 0 0 ...
## $ Count12andmore : num [1:79853] 0 0 0 0 4 0 0 0 0 0 ...
## $ Marital_Status : Factor w/ 2 levels "0","1": 1 2 1 2 1 1 1 1 2 2 ...
## $ Veh_Owned : num [1:79853] 3 3 1 1 2 1 3 3 2 3 ...
## $ Dependents : num [1:79853] 3 1 1 1 1 4 4 2 4 3 ...
## $ Accomodation : Factor w/ 2 levels "0","1": 2 2 2 1 1 1 2 1 2 2 ...
## $ Risk_Score : num [1:79853] 98.8 99.1 99.2 99.4 98.8 ...
## $ Premiums_Paid : num [1:79853] 8 3 14 13 15 4 8 4 8 8 ...
## $ Sourcing_Channel: Factor w/ 5 levels "A","B","C","D",..: 1 1 3 1 1 2 3 1 1 1 ...
## $ Residence : Factor w/ 2 levels "Rural","Urban": 1 2 2 2 2 1 1 2 2 1 ...
## $ Premium : num [1:79853] 5400 11700 18000 13800 7500 3300 20100 3300 5400 9600 ...
## $ Default : Factor w/ 2 levels "0","1": 2 2 2 2 1 2 2 2 2 2 ...
## $ AgeinYears : num [1:79853] 31 83 44 65 53 ...
## $ IncomeClass : Factor w/ 3 levels "low","middle",..: 1 2 1 2 1 1 3 1 1 2 ...summary(InsuranceDataset)## id Perc_Premiumcash Age Income
## Min. : 1 Min. :0.0000 Min. : 7670 Min. : 24030
## 1st Qu.:19964 1st Qu.:0.0340 1st Qu.:14974 1st Qu.: 108010
## Median :39927 Median :0.1670 Median :18625 Median : 166560
## Mean :39927 Mean :0.3143 Mean :18847 Mean : 208847
## 3rd Qu.:59890 3rd Qu.:0.5380 3rd Qu.:22636 3rd Qu.: 252090
## Max. :79853 Max. :1.0000 Max. :37602 Max. :90262600
## Count3-6 Count6_12 Count12andmore Marital_Status
## Min. : 0.0000 Min. : 0.00000 Min. : 0.00000 0:40032
## 1st Qu.: 0.0000 1st Qu.: 0.00000 1st Qu.: 0.00000 1:39821
## Median : 0.0000 Median : 0.00000 Median : 0.00000
## Mean : 0.2484 Mean : 0.07809 Mean : 0.05994
## 3rd Qu.: 0.0000 3rd Qu.: 0.00000 3rd Qu.: 0.00000
## Max. :13.0000 Max. :17.00000 Max. :11.00000
## Veh_Owned Dependents Accomodation Risk_Score Premiums_Paid
## Min. :1.000 Min. :1.000 0:39823 Min. :91.90 Min. : 2.00
## 1st Qu.:1.000 1st Qu.:2.000 1:40030 1st Qu.:98.83 1st Qu.: 7.00
## Median :2.000 Median :3.000 Median :99.18 Median :10.00
## Mean :1.998 Mean :2.503 Mean :99.07 Mean :10.86
## 3rd Qu.:3.000 3rd Qu.:3.000 3rd Qu.:99.52 3rd Qu.:14.00
## Max. :3.000 Max. :4.000 Max. :99.89 Max. :60.00
## Sourcing_Channel Residence Premium Default AgeinYears
## A:43134 Rural:31670 Min. : 1200 0: 4998 Min. : 21.01
## B:16512 Urban:48183 1st Qu.: 5400 1:74855 1st Qu.: 41.02
## C:12039 Median : 7500 Median : 51.03
## D: 7559 Mean :10925 Mean : 51.63
## E: 609 3rd Qu.:13800 3rd Qu.: 62.02
## Max. :60000 Max. :103.02
## IncomeClass
## low :33495
## middle:25779
## high :20579
##
##
## - IncomeClass, Marital Status, Accomodation, SourcingChannel, Residence and Default have now been converted to factors, all with levels 2 or 3, except SourcingChannel that has 5 levels
- 50.1% of policy holders are unmarried
- 50.1% of the policy holders own their accomodation ^ The predominant sourcing channel is A, accounting for 54% of the policy holders, while the least is E, accounting for <1% (0.8%) of all policy holders
- 60.3% of policy holders have their residences in Urban areas
- 6.3% of policy holders have defaulted their premium
Lets remove insignificant columns (Age in Days)
InsuranceDataset <- subset(InsuranceDataset, select = -c(3))- Having removed the Age in Days, lets see the new dimensions
dim(InsuranceDataset)## [1] 79853 184. Exploratory Data Analysis
4.1 Univariate Analysis of all Numetrical Variables
4.1.1 Univariate Analysis of Numerical variables with histogram
install.packages("ggplot2")## Warning: package 'ggplot2' is in use and will not be installedlibrary(ggplot2)4.2 Lets draw histogram and boxplot of numerical variables using ggplot
plot_histogram_n_boxplot = function(variable, variableNameString, binw){
h = ggplot(data = InsuranceDataset, aes(x= variable))+
labs(x = variableNameString,y ='count')+
geom_histogram(fill = 'green',col = 'white',binwidth = binw)+
geom_vline(aes(xintercept=mean(variable)),
color="black", linetype="dashed", size=0.5)
b = ggplot(data = InsuranceDataset, aes('',variable))+
geom_boxplot(outlier.colour = 'red',col = 'red',outlier.shape = 19)+
labs(x = '',y = variableNameString)+ coord_flip()
grid.arrange(h,b,ncol = 2)
}4.2.1 Observation on Percentage ofo Premium Paid with Cash
hist(InsuranceDataset$Perc_Premiumcash, col = "blue", main = "Percentage of Premium Paid by Cash")
plot_histogram_n_boxplot(InsuranceDataset$Perc_Premiumcash, 'Percentage of Premium Paid by Cash', 1)
* Most of the policy holders don’t pay with cash * The Median proportion that pays with cash is 17%
4.2.1 Observation on Age
plot_histogram_n_boxplot(InsuranceDataset$AgeinYears, 'Age', 1)
- Age is normally distributed
- The Median Age is 51 years
- Age is skewed to the left but there are right Outliers
4.2.2 Observation on Income
hist(InsuranceDataset$Income, col = "blue", main = "Income")
4.2.3 Observation on ‘Count3-6’; the number of times premium was paid 3-6 months late
plot_histogram_n_boxplot(InsuranceDataset$`Count3-6`, 'Count3-6', 1)
* Majority of policy holders pay their premium on time, just a few pay 3-6 months late
4.2.4 Observation on Count6_12; Number of times premium was paid 6-12 months late
plot_histogram_n_boxplot(InsuranceDataset$Count6_12, 'Count6_12', 1)
* Most times, premiums were paid on time by policy holders, only on few occasions were there delays of upto 6-12 months. * Most delays were 1 day, though could extend to 3 on fewer occassions, while there are vert few extreme cases were delays extended
4.2.5 Observation on Count12andmore; Number of times premium were paid more than 12 months late.
plot_histogram_n_boxplot(InsuranceDataset$Count12andmore, 'Count12andmore', 1)
* Premiums were rarely paid more than 12 months late. * The highest form of delay is 3-6 months late, while the least is a delay of 12 months and more.
4.2.6 Observation on Number of Vehicle Owned by Customers
plot_histogram_n_boxplot(InsuranceDataset$Veh_Owned, 'Vehicle Owned', 1)
* The distribution of number of vehicle of owned by customers is evenly distributed between 1 to 3 vehicles * The proportion of customers that own 1,2 and 3 cars each are the same as seen in the chart above
4.2.7 Observation on Dependents; Number of Dependents in the family of customers
plot_histogram_n_boxplot(InsuranceDataset$Dependents, 'Dependents', 1)
* The distribution of Dependents in family is also evenly distributed * Most of the customers have 2-3 dependents * The proportion of customers with 1,2,3 & 4 dependents is the same.
4.2.8 Observation on No of Premium Paid till date
plot_histogram_n_boxplot(InsuranceDataset$Premiums_Paid, 'No of Premium Paid', 1)
- The distribution on the Number of Premium Paid till date is a Normal Distribution
- The Median no is 10, while the distribution is skewed to the left, but there are right outliers, that is extreme values to the right
4.2.9 Observation on the Total Premium Amount Paid till now
plot_histogram_n_boxplot(InsuranceDataset$Premium, 'Premium', 1)
- The Median Total Premium Paid is 7500, the minimum is 1200 and the maximum is 60,000
- The first Quartile and third Quartile of the total Premium Paid is between 5,400 and 13,800
- The distribution is skewed to the left, with extreme values on the right
- The modal Total Premium Paid is 10,000
- The least total Premium Paid per individual policy holder is between 35,000 and 60,000
4.2.10 Obervation on Risk Score
plot_histogram_n_boxplot(InsuranceDataset$Risk_Score, 'Risk Score', 1)
* The Risk Score is skwed to the right, with left outliers * The Median Risk Score is 99 * Majority of the Clients have very high risk score, with the higher proportion having 99% risk score
5. Bivariate Analysis
5.1 Let’s plot percent stacked barchart to see the effect of independents variables on Default, which is the variable of interest
plot_stacked_barchart = function(variable, variableNamesString){ggplot(InsuranceDataset, aes(fill = Default, x = variable)) + geom_bar(position = "fill")+
labs(title = variableNamesString, y = '', x = '')+
scale_fill_manual(values = c("RED", "BLUE"))}5.1.1 Default versus Marital Status
plot_stacked_barchart(InsuranceDataset$Marital_Status, 'Marital Status')
* Marital Status doesn’t seem to have any impact on the Default on Premium as the similar proportion of Default exists between the Married and the Non Married. * Most of the customers don’t Default on their Premiums
5.1.2 Default versus Accomodation
plot_stacked_barchart(InsuranceDataset$Accomodation, 'Accomodation')
* Accomodation doesn’t seem to have much impact on Default * Thus who own their accomodation may seem to have a light higher chance of Defaulting on their premiums
5.1.3 Default versus Sourcing Channel
plot_stacked_barchart(InsuranceDataset$Sourcing_Channel, 'Sourcing Channel')
* Sourcing Channels tends to have varying impact on Default * Customers sourced from Channel A have the lowest chance of Defaulting * Customers sourced from Channel D and E have the higher Chance of Defaulting as compared to Channel A * Customers sourced from D Channel have the highest chance of Defaulting, followed by those from channels C & E, whose risk of Defaulting seems to be the same, followed by those from B, while Customers from A have the lowest risk of Defaulting
5.1.4 Default versus Residence
plot_stacked_barchart(InsuranceDataset$Residence, 'Residence')
* Residence doesn’t seem to have any impact on Default * Those from Rural areas tends to have a slightly higher chance of Defaulting
5.1.5 Defualt versus Income Class
plot_stacked_barchart(InsuranceDataset$IncomeClass, 'Income Class')
* The Income Class of the customer tend to have a significant impact on Default * Those Customers from lower income groups have a higher chance of Defaulting than those from Middle Income Class, while the High Income Class Customers have the least likelihood of Defaulting as expected
5.1.6 Age versus Late Premium 3-6 months using boxplot
boxplot(InsuranceDataset$AgeinYears~InsuranceDataset$`Count3-6`, col = "Blue", main = "Age versus Late Premium in 3- 6 months")
* The concentration of late payment, 3-6 month late is higher around the middle age segment of 40-60 years, median peak ranging around 50 years
5.1.7 Age versus Late Premium after 6-12 months
boxplot(InsuranceDataset$AgeinYears~InsuranceDataset$Count6_12, col = "Blue", main = "Age versus Late Premium in 6-12 months")
* This is similar to above 3-6 months, but it has more varying peaks per age
5.1.8 Age Versus Late Premium After 12 MOnths
boxplot(InsuranceDataset$AgeinYears~InsuranceDataset$Count12andmore, col = "Blue", main = "Age versus Late Premium After 12 Months")
* This is similar to 3-6 months * There are Outliers
5.1.9 No of Dependents versus Late Premium in 3- 6 months
boxplot(InsuranceDataset$Dependents~InsuranceDataset$`Count3-6`, col = "Blue", main = "No of Dependents versus Late Premium in 3-6 months")
* The higher the number of Dependents the higher the chances of late payment in 3- 6 months
5.1.10 No of Dependents versus Late Payment in 6-12 Months
boxplot(InsuranceDataset$Dependents~InsuranceDataset$Count6_12, col = "Blue", main = "No of Dependents versus Late Premium in 6-12 months")
* Payment of 6-12 months is more prevalent among the customers with higher number of Dependents
5.1.11 Income versus Late Premium After 12 months
boxplot(InsuranceDataset$Income~InsuranceDataset$Count12andmore, col = "Blue", main = "Income versus Late Payment After 12 MOnths")
* The higher the income the lower the chances of delay in payment of Premiums
5.2 Bivariate Analysis: Plotting the Relationship between the Dependent Factor variable and Numerical Variables
- Lets see the relationship between Default and the Numeric Variables (Age in Years, Percentage Premium Paid in Cash, Vehicle Owned, Count 3-6 Months Late, Count 6-12 Months Late, Count More than 12 Months, Risk Score, No of Dependents, No of Premium Paid till date and Total Premium Paid)
5.2.1 Relationship between Age in Years and Defualt
ggplot(InsuranceDataset,aes_string(x=InsuranceDataset$AgeinYears,fill="Default")) + geom_histogram(bins=50,alpha=0.5,colour='black')
* The lower the age the more the chances of Default on Premiums
5.2.2 Relationship between Percentage Premium Paid in Cash and Default
ggplot(InsuranceDataset,aes_string(x=InsuranceDataset$Perc_Premiumcash,fill="Default")) + geom_histogram(bins=50,alpha=0.5,colour='black')
* The more the percentage premium paid in cash the more the likelihood of Default
5.2.3 Relationship between Vehicle Owned and Default
ggplot(InsuranceDataset,aes_string(x=InsuranceDataset$Veh_Owned,fill="Default")) + geom_histogram(bins=50,alpha=0.5,colour='black')
* No of Vehicle Owned doesn’t have any effect on Defualt on Payment of Premium
5.2.3 Relationship between Count 3-6 months Late and Default
ggplot(InsuranceDataset,aes_string(x=InsuranceDataset$`Count3-6`,fill="Default")) + geom_histogram(bins=50,alpha=0.5,colour='black')
* According to the data available, the lower the number of times premium was paid below 6 months, the more the likelihood of Default * THis doesn’t sound logical and we will still check the dat
5.2.3 Relationship between Count more than 6 months Late and Default
ggplot(InsuranceDataset,aes_string(x=InsuranceDataset$Count12andmore,fill="Default")) + geom_histogram(bins=50,alpha=0.5,colour='black')
* The proportion of Customers that pay their premium more than 12 months late and those who Default on Premium is propotional to increasing delays in payment
5.2.4 Relationship between Risk Score and Default
ggplot(InsuranceDataset,aes_string(x=InsuranceDataset$Risk_Score,fill="Default")) + geom_histogram(bins=50,alpha=0.5,colour='black')
* The more the Risk Score the higher the chance of Default
5.2.5 Relationship between No of Dependents and Default
ggplot(InsuranceDataset,aes_string(x=InsuranceDataset$Dependents,fill="Default")) + geom_histogram(bins=50,alpha=0.5,colour='black')
* No of Dependents have only a slight impact on Default; although the higher the number of Dependents the higher the chance of Default
5.2.6 Relationship between No of Premium Paid till date and Default
ggplot(InsuranceDataset,aes_string(x=InsuranceDataset$Premiums_Paid,fill="Default")) + geom_histogram(bins=50,alpha=0.5,colour='black')
* The lower the No of Premium Paid till date the higher the chance of Default as expected
5.2.7 Relationship between Total Premium and Default
ggplot(InsuranceDataset,aes_string(x=InsuranceDataset$Premium,fill="Default")) + geom_histogram(bins=50,alpha=0.5,colour='black')
* The lower the Total Premium Paid till date the higher the chance of Default
5.3 Correlation Plot Between the Entire Variables in the Data Set
5.3.1 Install Corrplot Package
install.packages("corrplot")## Warning: package 'corrplot' is in use and will not be installedlibrary(corrplot)5.3.2 In order to do the correlation plot, we convert all Factor variables to Numeric
InsuranceDataset$IncomeClass <- as.numeric(InsuranceDataset$IncomeClass)
InsuranceDataset$Marital_Status <- as.numeric(InsuranceDataset$Marital_Status)
InsuranceDataset$Accomodation <- as.numeric(InsuranceDataset$Accomodation)
InsuranceDataset$Sourcing_Channel <- as.numeric(InsuranceDataset$Sourcing_Channel)
InsuranceDataset$Residence <- as.numeric(InsuranceDataset$Residence)
InsuranceDataset$Default <- as.numeric(InsuranceDataset$Default)5.3.3 Use the Corrplot on the dataset already changed to Numeric
M <- cor(InsuranceDataset)
corrplot(M, order = "AOE")
- There is a negative correlation between Percentage of Premium Paid in Cash Credit and Defaulting on Premium *There is a negative correlation between late payments of Premium in 3-6 months, 6-12 months and after 12 months. The delay of payment of 6-12 months has a higher negative correlation
- There is a positive correlation between age and Default
- No of Premium Paid to date is positively correlated with Risk Score
6 Preliminary Conlcusion on Initial analysis
- The data was collected over 5 years, or up to 10 years
- 50.1% of policy holders are unmarried, and there seems to be no impact between marital status of customers and the risk of Defaulting on Premium
- 50.1% of the policy holders own their accommodation, and there is almost no impact between ownership of accommodation and Default on Premiums
- The predominant sourcing channel is A, accounting for 54% of the policy holders, while the least is E, accounting for <1% (0.8%) of all policy holders: Customers sourced from D Channel have the highest chance of Defaulting, followed by those from channels C & E, whose risk of Defaulting seems to be the same, followed by those from B, while Customers from A have the lowest risk of Defaulting
- 60.3% of policy holders have their residences in Urban areas; Residences doesn’t seem to have a significant impact on Defaulting on Premiums
- 6.3% of policy holders have defaulted their premium
- Customers from high income class have the lowest risk of Defaulting, while those from low income class have the higher risk of Defaulting
- The higher the risk score the higher the risk of Default
- The higher the numbers of Premium Paid till date the lower the risk of Default
- The higher the Total Premiums Paid till date, the lower the risk of Default
- The higher the Percentage of Premium Paid in Cash Credit the higher the risk of Defaulting on Premium *The higher occurence of late payments of Premium in 3-6 months, 6-12 months and after 12 months, the higher the risk of Defaulting on Premium. The delay of payment of 6-12 months has a higher risk of Defaulting
- The higher the age, the lower the risk of Default
- The more the No of Premium Paid to date the lower the Risk Score.
#======================================================================= # # T H E - E N D # #=======================================================================
Generate the .R file from this .Rmd to hold the source code
knitr::purl(“Insurance Premium Default RMD.RMD”, documentation = 0)