### 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…

## General Insurance:

Broadly, General insurance is divided into 3 Categories i.e.
1.   Personal Insurance
2.   Liability Insurance
3.   Property Insurance
Personal Insurance has 2 major aspects i.e.
1.   Mediclaim Policies
2.   Personal Accident Policies

Mediclaim Policies:
Introduced in India in 1981. They offer Health insurance and can be issued as Individual policies or as a Group Policy.

Health Insurance:
·        It is a type of insurance coverage that covers the cost of an insured individual's medical and surgical expenses. Depending on the type of health insurance coverage, either the insured pays costs out-of-pocket and is then reimbursed, or the insurer makes payments directly to the provider.
·        A Health Insurance policy reimburses the insured for medical and surgical expenses arising from illness or injury that leads to hospitalization

Inclusions: Following expenses are reimbursed
1.   Nursing expenses, Anaesthesia and other specialist doctor Fees.
2.   Operation theatre, Room and Boarding Charges
3.   Treatment in a Hospital which has to be
·        Registered
·        Has an Operation theatre
·        Has atleast 15 Patient Beds (10 for C class Cities)
4.   Requirement is that Patient should be admitted for atleast 24 hrs but this condition not applicable in case of – “Dialysis, Chemotherapy, Dental Surgery etc”.
5.   Medical Expenses 30 days prior to and 60 days after hospitalization are also paid provided incurred for same ailment for which he is hospitalized.
Exclusions: Following Expenses are excluded from the Policy:
1.   War and Nuclear Perils
2.   Pre-existing Disease, AIDS, Hearing Aids and Spectacles
3.   Certain ailments are excluded for the first 30 days from the start of policy and some ailments are excluded for the first year such as Cataract, Hernia, Piles as they take time to develop.

Notes:
1.   These Policies can be issued in age group 5-80 years. However Children can covered between 3 months and 5 years too if one of the parents have taken a Mediclaim policy.
2.   Principle of Contribution Shall Apply.
3.   Policy can be cancelled by 30 days Notice. If cancelled by insurer, refund is made on Prorate basis. If cancelled by insured, refund is based on Short period basis.

Deductions by Government:
 Persons Covered Exemption Limit Check-up Exemption Total Self, spouse and children Rs. 25000 Rs.5000 Rs.30000 Self and family + parents Rs.25000+25000=50000 Rs.5000 Rs.55000 Self and family+ senior citizen Parents Rs.25000+30000=55000 Rs.5000 Rs.60000 Self (senior citizen) and family and Parents (senior citizen) Rs.30000+30000=60000 Rs.5000 Rs65000