This document discusses using clustering analysis to segment an insurance company's business. The objectives are to maximize profits by focusing on markets with the lowest claim to coverage ratios and to estimate these ratios for different income clusters. The analysis identifies 5 clusters with Cluster 2 having the highest claim to coverage ratio but also higher average incomes and fewer customers. The analysis recommends the company focus on Cluster 2 markets to increase insurance product penetration for higher profits by reducing claim ratios and increasing customers.

1. CLUSTERING FOR A
INSURANCE
COMPANY
Presented by : Ashish Ranjan
Vaibhav Jain

2. Objective of the Study
O Maximize the company profits by
segmenting the business according to the
markets where the claim/coverage ratio is
least.
O To estimate the claim/coverage ratio for
each clusters & focus on the income group
having highest income with least product
penetration.

3. Data Variables Explained
O Claim Id
O Incident Date
O Claim Type : 1. Wind/Hail 2. Water Damage
O
O
O
O
O
3. Fire/Smoke 4.Contamination
5. Theft/Vandalism
Policy Id
Coverage
Income(in Thousands)
Town size
Others Variables

4. Data Snapshot

5. Data Snapshot

6. Rapid Miner

7. K-Means Clustering

8. Clustering Analysis
Attributes
cluster_0
cluster_1
cluster_2
cluster_3
cluster_4
Claim Amount
32.13595628
646.7065116
429.937594
67.60462253
124.0138065
Coverage
136.2993755
1453.186047
588.8721805
402.1022067
1021.9
Income
46.86104606
199.0813953
109.7518797
83.51800232
134.5645161
Members
2562
86
133
861
310
CLAIM/COVERAGE(%)
23.57747874
44.50266455
73.01034219
16.8127957
12.13561077
The claim/coverage % is highest for Cluster 2 i.e. 73% and the
members contributing towards the same are also less. But the
average income of the members are significantly high.

9. Clustering Analysis
Types of Claims
cluster
1
2
3
4
5
Grand Total
cluster_0
630
389
589
227
727
2562
cluster_1
10
6
46
19
5
86
cluster_2
86
47
cluster_3
228
130
163
70
270
861
cluster_4
95
52
35
15
113
310
Grand Total
963
577
919
378
1115
3952
133
Cluster 2 contains only claim types 3 (Fire) & 4
(Contamination). Hence, company should focus on increasing
their portfolio bucket by offering other insurance coverage's i.e.
1 (Wind/Hail), 2 (Water Damage) & 5 (Theft) .

10. Clustering Analysis
Cluster
>2.5 L (1)
50TH-2.499L(2)
10TH49.99TH(3)
2.5TH9.999TH(4)
<2.5TH(5)
Grand Total
cluster_0
668
623
518
435
318
2562
cluster_1
20
21
17
18
10
86
cluster_2
30
28
25
33
17
133
cluster_3
219
208
165
178
91
861
cluster_4
85
70
56
67
32
310
Grand Total
1022
950
781
731
468
3952

11. Recommendations
O On the basis of analysis, we recommend to
the company to concentrate on Cluster 2
markets(towns) where the average income
is high & penetration of different types of
insurance products are less.
O Overall, by reduction in claim/coverage ratio
& increased customer base will contribute
towards higher profitability for the company.

12. THANK YOU