{"id":3526,"date":"2023-08-31T11:12:58","date_gmt":"2023-08-31T11:12:58","guid":{"rendered":"https:\/\/neuraldesigner.com\/learning\/vehicle-insurances\/"},"modified":"2025-09-17T12:18:37","modified_gmt":"2025-09-17T10:18:37","slug":"vehicle-insurances","status":"publish","type":"learning","link":"https:\/\/www.neuraldesigner.com\/learning\/examples\/vehicle-insurances\/","title":{"rendered":"Target customers for a vehicle insurance using machine learning"},"content":{"rendered":"<section><\/section>\n<p>An insurance company that already offers health insurance now wants to target customers likely to be interested in vehicle insurance.<\/p>\n<p>To do this, we will build a machine learning model that predicts which customers are most likely to show interest.<\/p>\n<p><a href=\"https:\/\/www.neuraldesigner.com\/solutions\/customer-segmentation\">Customer targeting<\/a> involves identifying individuals who are more likely to be interested in a specific product or service.<\/p>\n<p>This example is solved with <a href=\"https:\/\/www.neuraldesigner.com\/\">Neural Designer<\/a>. To follow this example step by step, you can use the <a href=\"https:\/\/www.neuraldesigner.com\/free-trial\">free trial<\/a>.<\/p>\n<section>\n<section id=\"ApplicationType\">\n<h2><span style=\"font-size: 16px;\">Contents<\/span><\/h2>\n<\/section>\n<\/section>\n<section>\n<ol>\n<li><a href=\"#ApplicationType\">Application type<\/a>.<\/li>\n<li><a href=\"#DataSet\">Data set<\/a>.<\/li>\n<li><a href=\"#NeuralNetwork\">Neural network<\/a>.<\/li>\n<li><a href=\"#TrainingStrategy\">Training strategy<\/a>.<\/li>\n<li><a href=\"#ModelSelection\">Model selection<\/a>.<\/li>\n<li><a href=\"#TestingAnalysis\">Testing analysis<\/a>.<\/li>\n<li><a href=\"#ModelDeployment\">Model deployment<\/a>.<\/li>\n<li><a href=\"#TutorialVideo\">Tutorial video<\/a>.<\/li>\n<\/ol>\n<\/section>\n<section id=\"ApplicationType\">\n<h2>1. Application type<\/h2>\n<p>This project involves <a href=\"https:\/\/www.neuraldesigner.com\/learning\/tutorials\/neural-networks-applications#Classification\">classification<\/a> as the predictor variable is binary (interested or not interested).<\/p>\n<p>The goal is to create a model to obtain the probability of interest as a function of customer features.<\/p>\n<\/section>\n<section id=\"DataSet\">\n<h2>2. Data set<\/h2>\n<p>The data set contains information to create our model. We need to configure three things:<\/p>\n<ul>\n<li>Data source.<\/li>\n<li>Variables.<\/li>\n<li>Instances.<\/li>\n<\/ul>\n<h3>Data source<\/h3>\n<p>The data file used for this example is <a href=\"https:\/\/www.neuraldesigner.com\/wp-content\/uploads\/2023\/10\/vehicle-insurances.csv\">vehicle-insurances.csv<\/a>, which contains 9 features about 381109 insurance company customers.<\/p>\n<h3>Variables<\/h3>\n<p>The data set includes the following <a href=\"https:\/\/www.neuraldesigner.com\/learning\/tutorials\/data-set#Variables\">variables<\/a>:<\/p>\n<\/section>\n<h4 data-start=\"102\" data-end=\"126\"><strong data-start=\"106\" data-end=\"124\">Identification<\/strong><\/h4>\n<ul data-start=\"127\" data-end=\"173\">\n<li data-start=\"127\" data-end=\"173\">\n<p data-start=\"129\" data-end=\"173\"><strong data-start=\"129\" data-end=\"135\">ID<\/strong>: Unique identifier of the customer.<\/p>\n<\/li>\n<\/ul>\n<h4 data-start=\"175\" data-end=\"205\"><strong data-start=\"179\" data-end=\"203\">Customer Information<\/strong><\/h4>\n<ul>\n<li data-start=\"208\" data-end=\"240\"><strong data-start=\"208\" data-end=\"218\">Gender<\/strong>: Customer\u2019s gender.<\/li>\n<li data-start=\"243\" data-end=\"269\"><strong data-start=\"243\" data-end=\"250\">Age<\/strong>: Customer\u2019s age.<\/li>\n<li data-start=\"272\" data-end=\"362\"><span style=\"box-sizing: border-box; margin: 0px; padding: 0px;\"><strong>Previously insured<\/strong>: Yes, if the customer already has vehicle insurance; no otherwise.<\/span><\/li>\n<\/ul>\n<h4 data-start=\"364\" data-end=\"393\"><strong data-start=\"368\" data-end=\"391\">Vehicle Information<\/strong><\/h4>\n<ul>\n<li data-start=\"396\" data-end=\"445\"><strong data-start=\"396\" data-end=\"411\">Vehicle age<\/strong>: Age of the customer\u2019s vehicle.<\/li>\n<li data-start=\"448\" data-end=\"532\"><strong data-start=\"448\" data-end=\"466\">Vehicle damage<\/strong>: Yes if the vehicle has been damaged in the past, no otherwise.<\/li>\n<\/ul>\n<h4 data-start=\"534\" data-end=\"565\"><strong data-start=\"538\" data-end=\"563\">Financial Information<\/strong><\/h4>\n<ul data-start=\"566\" data-end=\"642\">\n<li data-start=\"566\" data-end=\"642\">\n<p data-start=\"568\" data-end=\"642\"><strong data-start=\"568\" data-end=\"586\">Annual premium<\/strong>: Yearly insurance premium to be paid by the customer.<\/p>\n<\/li>\n<\/ul>\n<h4 data-start=\"644\" data-end=\"675\"><strong data-start=\"648\" data-end=\"673\">Customer Relationship<\/strong><\/h4>\n<ul data-start=\"676\" data-end=\"758\">\n<li data-start=\"676\" data-end=\"758\">\n<p data-start=\"678\" data-end=\"758\"><strong data-start=\"678\" data-end=\"689\">Vintage<\/strong>: Number of days the customer has been associated with the company.<\/p>\n<\/li>\n<\/ul>\n<h4 data-start=\"760\" data-end=\"785\"><strong data-start=\"764\" data-end=\"783\">Target Variable<\/strong><\/h4>\n<ul data-start=\"786\" data-end=\"888\">\n<li data-start=\"786\" data-end=\"888\">\n<p data-start=\"788\" data-end=\"888\"><strong data-start=\"788\" data-end=\"800\">Response<\/strong>: Indicates whether the customer is interested in vehicle insurance (1 = yes, 0 = no).<\/p>\n<\/li>\n<\/ul>\n<section id=\"DataSet\">\n<h3>Instances<\/h3>\n<p>On the other hand, the <a href=\"https:\/\/www.neuraldesigner.com\/learning\/tutorials\/data-set#Instances\">instances<\/a> are divided randomly into training, selection, and testing subsets, containing 60%, 20%, and 20% of the instances, respectively.<\/p>\n<h3>Distributions<\/h3>\n<p>Our target variable is the <b>response<\/b>. We can calculate the data <a href=\"https:\/\/www.neuraldesigner.com\/learning\/tutorials\/data-set#Distributions\">distributions<\/a> and plot a pie chart with the percentage of instances for each class.<\/p>\n<p><img decoding=\"async\" src=\"https:\/\/www.neuraldesigner.com\/images\/vehicle_insurance_piechart.webp\" \/><\/p>\n<p>As we can see, the target variable is unbalanced, with almost 88% of customers showing no interest in vehicle insurance, while only 12% are interested.<\/p>\n<p>Therefore, we could say that around 1 out of 10 customers is interested in vehicle insurance.<\/p>\n<h3>Input-target correlations<\/h3>\n<p>Furthermore, we can also compute the input-target correlations, which might indicate which factors significantly influence vehicle insurance.<\/p>\n<p><img decoding=\"async\" src=\"https:\/\/www.neuraldesigner.com\/images\/vehicle_insurance_correlations_chart.webp\" \/><\/p>\n<p>In this example, <i>vehicle_damage<\/i> and <i>previously_insured<\/i> are the two variables with the highest correlation; <i>vehicle_damage<\/i> has a positive correlation, while <i>previously_insured<\/i> has a negative correlation.<\/p>\n<\/section>\n<section>\n<h2 id=\"NeuralNetwork\">3. Neural network<\/h2>\n<p>The next step is to set the <a href=\"https:\/\/www.neuraldesigner.com\/learning\/tutorials\/neural-network\">neural network<\/a> parameters. Classification models usually contain the following layers:<\/p>\n<ul>\n<li>Scaling layer.<\/li>\n<li>Dense layers.<\/li>\n<\/ul>\n<h3>Scaling layer<\/h3>\n<p>For the <a href=\"https:\/\/www.neuraldesigner.com\/learning\/tutorials\/neural-network#ScalingLayer\">scaling layer<\/a>, we set the <a href=\"https:\/\/www.neuraldesigner.com\/learning\/tutorials\/neural-network#MeanStandardDeviationScalingMethod\">mean and standard deviation scaling method<\/a>.<\/p>\n<h3>Dense layers<\/h3>\n<p>We set one <a href=\"https:\/\/www.neuraldesigner.com\/learning\/tutorials\/neural-network#PerceptronsLayers\">perceptron layer<\/a> with 3 neurons having the <a href=\"https:\/\/www.neuraldesigner.com\/learning\/tutorials\/neural-network#LogisticActivationFunction\">logistic activation function<\/a>.<\/p>\n<p>This layer has seven inputs, and since the target variable is binary, it has only one output.<\/p>\n<h3>Neural network graph<\/h3>\n<p>The neural network for this example can be represented with the following diagram:<\/p>\n<p><img decoding=\"async\" src=\"https:\/\/www.neuraldesigner.com\/images\/vehicle_insurance_nn.webp\" \/><\/p>\n<\/section>\n<section id=\"TrainingStrategy\">\n<h2>4. Training strategy<\/h2>\n<p>The fourth step is to set the <a href=\"https:\/\/www.neuraldesigner.com\/learning\/tutorials\/training-strategy\">training strategy<\/a>, defining what the neural network will learn. A general training strategy for classification consists of two terms:<\/p>\n<ul>\n<li>A loss index.<\/li>\n<li>An optimization algorithm.<\/li>\n<\/ul>\n<h3>Loss index<\/h3>\n<p>The <a href=\"https:\/\/www.neuraldesigner.com\/learning\/tutorials\/training-strategy#LossIndex\">loss index<\/a> chosen for this problem is the <a href=\"https:\/\/www.neuraldesigner.com\/learning\/tutorials\/training-strategy#NormalizedSquaredError\">normalized squared error<\/a> between the outputs from the neural network and the targets in the data set with L1 regularization.<\/p>\n<h3>Optimization algorithm<\/h3>\n<p>The selected <a href=\"https:\/\/www.neuraldesigner.com\/learning\/tutorials\/training-strategy#OptimizationAlgorithm\">optimization algorithm<\/a> is the <a href=\"https:\/\/www.neuraldesigner.com\/learning\/tutorials\/training-strategy#AdaptativeLinearMomentum\">adaptive linear momentum<\/a>.<\/p>\n<p>The following chart shows how training and selection errors develop with the epochs during training.<\/p>\n<p><img decoding=\"async\" src=\"https:\/\/www.neuraldesigner.com\/images\/cross_sell_training_error.webp\" \/><\/p>\n<p>The final values are <b>training error = 0.593 NSE<\/b> and <b>selection error = 0.598 NSE<\/b>.<\/p>\n<\/section>\n<section id=\"ModelSelection\">\n<h2>5. Model selection<\/h2>\n<p>The objective of <a href=\"https:\/\/www.neuraldesigner.com\/learning\/tutorials\/model-selection\">model selection<\/a> is to find the network architecture with the best generalization properties, which means finding the one that minimizes the error on the <a href=\"https:\/\/www.neuraldesigner.com\/learning\/tutorials\/data-set#SelectionInstances\">selected instances<\/a> of the data set.<\/p>\n<p>More specifically, we\u00a0<span style=\"box-sizing: border-box; margin: 0px; padding: 0px;\">aim to develop a neural network with a selection error of less than\u00a0<strong>0.598 NSE<\/strong>, the value we have previously <\/span>achieved.<\/p>\n<h3>Order selection<\/h3>\n<p><a href=\"https:\/\/www.neuraldesigner.com\/learning\/tutorials\/model-selection#OrderSelection\">Order selection<\/a> algorithms train several network architectures with a different number of neurons and select the one with the smallest selection error.<\/p>\n<p>The <a href=\"https:\/\/www.neuraldesigner.com\/learning\/tutorials\/model-selection#IncrementalOrder\">incremental order<\/a> method starts with a few neurons and increases the complexity at each iteration.<\/p>\n<p>The final selection error achieved is <b>0.587<\/b>\u00a0for an optimal number of neurons of 6.<\/p>\n<p><img decoding=\"async\" src=\"https:\/\/www.neuraldesigner.com\/images\/vehicle_insurance_finalnn.webp\" \/><\/p>\n<p>The graph above represents the architecture of the final neural network.<\/p>\n<\/section>\n<section id=\"TestingAnalysis\">\n<h2>6. Testing analysis<\/h2>\n<p>The objective of the <a href=\"https:\/\/www.neuraldesigner.com\/learning\/tutorials\/testing-analysis\">testing analysis<\/a> is to validate the generalization performance of the trained neural network.<\/p>\n<h3>ROC curve<\/h3>\n<p>To validate a classification technique, we need to compare the values provided by this technique to the observed values.<\/p>\n<p>We can use the <a href=\"https:\/\/www.neuraldesigner.com\/learning\/tutorials\/testing-analysis#RocCurve\">ROC curve<\/a>\u00a0as it is the standard testing method for binary classification projects.<\/p>\n<p><img decoding=\"async\" src=\"https:\/\/www.neuraldesigner.com\/images\/cross_sell_ROC.webp\" \/><\/p>\n<p>The AUC value for this example is 0.834.<\/p>\n<h3>Confusion matrix<\/h3>\n<p>The following table contains the elements of the <a href=\"https:\/\/www.neuraldesigner.com\/learning\/tutorials\/testing-analysis#ConfusionMatrix\">confusion matrix<\/a>. This matrix contains the true positives, false positives, false negatives, and true negatives for the variable <i>response<\/i>.<\/p>\n<table>\n<tbody>\n<tr>\n<th><\/th>\n<th>Predicted positive<\/th>\n<th>Predicted negative<\/th>\n<\/tr>\n<tr>\n<th>Real positive<\/th>\n<td style=\"text-align: right;\">9.1 \u2219 10<sup>3<\/sup> (11%)<\/td>\n<td style=\"text-align: right;\">205 (0%)<\/td>\n<\/tr>\n<tr>\n<th>Real negative<\/th>\n<td style=\"text-align: right;\">2.75 \u2219 10<sup>4<\/sup> (36%)<\/td>\n<td style=\"text-align: right;\">3.94 \u2219 10<sup>4<\/sup> (51%)<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>The total number of testing samples is 76221. The number of correctly classified samples is 48519 (63%), and the number of misclassified samples is 27702 (36%).<\/p>\n<h3>Positives rates<\/h3>\n<p>We can also observe these results in the <a href=\"https:\/\/www.neuraldesigner.com\/learning\/tutorials\/testing-analysis#PositivesNegativesRates\"> positive rates<\/a> chart:<\/p>\n<p><img decoding=\"async\" src=\"https:\/\/www.neuraldesigner.com\/images\/vehicle_insurance_rates.webp\" \/><\/p>\n<p>The initial positive rate was around 12%, and now, after applying our model, it is 25%. This means that we would be able to duplicate the vehicle insurance sales with this model.<\/p>\n<h3>Cumulative gain<\/h3>\n<p>We can also perform the <a href=\"https:\/\/www.neuraldesigner.com\/learning\/tutorials\/testing-analysis#CumulativeGain\">cumulative gain<\/a> analysis, a visual aid that shows the advantage of using a predictive model instead of randomness.<\/p>\n<p>It consists of three lines. The baseline represents the results one would obtain without using a model. The positive cumulative gain shows in the y-axis the percentage of positive instances found against the population represented in the x-axis.<\/p>\n<p>Similarly, the negative cumulative gain shows the percentage of the negative instances found against the population percentage.<\/p>\n<p><img decoding=\"async\" src=\"https:\/\/www.neuraldesigner.com\/images\/vehicle_insurance_cumulative_gain.webp\" \/><\/p>\n<p>In this case, using the model reveals that analyzing 50% of clients with a higher probability of interest in vehicle insurance would result in almost 100% of clients taking out the insurance.<\/p>\n<h3>Profit chart<\/h3>\n<p>Another testing method is the <a href=\"https:\/\/www.neuraldesigner.com\/learning\/tutorials\/testing-analysis#ProfitChart\">profit chart<\/a>.<br \/>\nThis testing method shows the difference in profits from randomness and those using the model, depending on the instance ratio.<\/p>\n<p><img decoding=\"async\" src=\"https:\/\/www.neuraldesigner.com\/images\/vehicle_insurance_profit_chart.webp\" \/><\/p>\n<p>The values of the previous plot are displayed below:<\/p>\n<ul>\n<li><b>Unitary cost<\/b>: 10 USD<\/li>\n<li><b>Unitary income<\/b>: 50 USD<\/li>\n<li><b>Maximum profit<\/b>: 125877 USD<\/li>\n<li><b>Samples ratio<\/b>: 0.35<\/li>\n<\/ul>\n<p>The graph shows that contacting 35% of the customers who are most likely interested in vehicle insurance, with a unitary cost of 10 USD and a unitary income of 50 USD, results in the maximum benefit of 125,877 USD.<\/p>\n<\/section>\n<section id=\"ModelDeployment\">\n<h2>7. Model deployment<\/h2>\n<p>Despite going through all the steps, the model we obtained is not the best it could have been. Nevertheless, it is still better than guessing randomly.<\/p>\n<p>The objective of the <a href=\"https:\/\/www.neuraldesigner.com\/learning\/tutorials\/model-deployment#ResponseOptimization\">Response Optimization algorithm<\/a> is to exploit the mathematical model to look for optimal operating conditions. Indeed, the predictive model allows us to simulate different operating scenarios and adjust the control variables to improve efficiency.<\/p>\n<p>An example is to maximize response probability while maintaining the age between two desired values.<\/p>\n<p>The following table summarizes the conditions for this problem.<\/p>\n<table>\n<tbody>\n<tr>\n<th>Variable name<\/th>\n<th>Condition<\/th>\n<th><\/th>\n<th><\/th>\n<\/tr>\n<tr>\n<th>Gender<\/th>\n<td style=\"text-align: right;\">None<\/td>\n<td style=\"text-align: right;\"><\/td>\n<td style=\"text-align: right;\"><\/td>\n<\/tr>\n<tr>\n<th>Age<\/th>\n<td style=\"text-align: right;\">Between<\/td>\n<td style=\"text-align: right;\">30<\/td>\n<td style=\"text-align: right;\">50<\/td>\n<\/tr>\n<tr>\n<th>Previously insured<\/th>\n<td style=\"text-align: right;\">None<\/td>\n<td style=\"text-align: right;\"><\/td>\n<td style=\"text-align: right;\"><\/td>\n<\/tr>\n<tr>\n<th>Vehicle age<\/th>\n<td style=\"text-align: right;\">None<\/td>\n<td style=\"text-align: right;\"><\/td>\n<td style=\"text-align: right;\"><\/td>\n<\/tr>\n<tr>\n<th>Vehicle damage<\/th>\n<td style=\"text-align: right;\">None<\/td>\n<td style=\"text-align: right;\"><\/td>\n<td style=\"text-align: right;\"><\/td>\n<\/tr>\n<tr>\n<th>Annual premium<\/th>\n<td style=\"text-align: right;\">None<\/td>\n<td style=\"text-align: right;\"><\/td>\n<td style=\"text-align: right;\"><\/td>\n<\/tr>\n<tr>\n<th>Vintage<\/th>\n<td style=\"text-align: right;\">None<\/td>\n<td style=\"text-align: right;\"><\/td>\n<td style=\"text-align: right;\"><\/td>\n<\/tr>\n<tr>\n<th>Response<\/th>\n<td style=\"text-align: right;\">Maximize<\/td>\n<td style=\"text-align: right;\"><\/td>\n<td style=\"text-align: right;\"><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>The following list shows the optimum values for the previous conditions.<\/p>\n<ul>\n<li><b>gender:<\/b> female.<\/li>\n<li><b>age:<\/b> 44.<\/li>\n<li><b>previously_insured:<\/b> 1 (yes).<\/li>\n<li><b>vehicle_age:<\/b> 3.<\/li>\n<li><b>vehicle_damage:<\/b> 1 (yes).<\/li>\n<li><b>annual_premium:<\/b> 85848.8.<\/li>\n<li><b>vintage:<\/b> 204.<\/li>\n<\/ul>\n<ul>\n<li><b>response:<\/b> 80%.<\/li>\n<\/ul>\n<\/section>\n<section id=\"TutorialVideo\">\n<h2>8. Video tutorial<\/h2>\n<p>Watch the step-by-step tutorial video below to help you complete this Machine Learning example for free using the powerful machine learning software <a href=\"https:\/\/www.neuraldesigner.com\/free-trial\">Neural Designer<\/a>.<\/p>\n<p>&nbsp;<\/p>\n<p><iframe src=\"https:\/\/www.youtube.com\/embed\/WCVPOc_7U4g\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<\/section>\n<section>\n<h2>References<\/h2>\n<ul>\n<li>We have obtained the data for this problem from the Machine Learning Repository <a href=\"https:\/\/www.kaggle.com\/anmolkumar\/health-insurance-cross-sell-prediction\">Kaggle<\/a>.<\/li>\n<\/ul>\n<\/section>\n<section>\n<h2>Related posts<\/h2>\n<\/section>\n","protected":false},"author":13,"featured_media":1328,"template":"","categories":[29],"tags":[47],"class_list":["post-3526","learning","type-learning","status-publish","has-post-thumbnail","hentry","category-examples","tag-finance"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.4 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Target customers for a vehicle insurance using machine learning<\/title>\n<meta name=\"description\" content=\"Build a machine learning model to target those customers who will be interested in taking out vehicle insurance.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.neuraldesigner.com\/learning\/examples\/vehicle-insurances\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" 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