### Role of Generalised Linear Model in non-life pricing Phase3

Phase1: http://www.actuarysense.com/2018/10/role-of-generalised-linear-model-in-non.html
Phase2: http://www.actuarysense.com/2018/11/role-of-generalised-linear-model-in-non.html So we know that the purpose of GLM is to find the relationship between mean of the response variable and covariates.

Linear Predictor: Let’s denote it with, “η” (eta). So, linear predictor is actually a function of covariates. For example, in the normal linear model where function is Y = B0 + B1x. So linear predictor will be η = B0 + B1x. Always note that linear predictor has to be linear in its parameter. In this case parameters are B0 and B1. But still the question is how I came up with B0 + B1x as a function? First of all, note that broadly there are two types of Covariates. 1. Variables: It takes the numerical value. For example: age of policyholder, years of ex…

### INSURANCE :

• It is a financial protection against something that might happen. Ex: Car insurance for car crash or House insurance for your house going on fire.
QUESTION  is whether TERM is INSURANCE or ASSURANCE:
• A life insurance policy, for example, provides coverage to an individual for a specified period of time. If the individual dies during that specific period, the insurance carrier will pay the amount of money agreed upon in the contract.
•  If the insured individual lives past the specified time period, the insurance policy becomes void, and the provider is not obligated to make any payment.

### ASSURANCE:

• It is protection against something that will happen. For ex: Life assurance because you will die.
• A life assurance policy will always result in a payment being made because the investment is combined with the sum insured.

Note: In insurance sector , Both Insurance and Assurance are used Interchangeably. To counter this, companies now offer detailed guides to their customers containing information that satisfies customer needs and answers frequently asked questions.