Technological advancement has resulted in producing a large amount of unprocessed data. Data can be collected, processed, analyzed, and stored rather inexpensively. This capability has enabled to make innovations in banking, insurance, financial transactions, health care, communications, Internet, and e-commerce. Risk management is an integral part of the insurance industry as the risk levels determine the premiums of the insurance policies. Usually, insurance companies claim higher premiums from the insurance policy holders having higher risk factors. The higher the accuracy of risk evaluation of an applicant for a policy, the better is the accuracy in the pricing of the premium. Risk classification of customers in insurance companies plays an important role. Risk classification is based on the grouping of customers on the basis of their risk levels calculated by using machine learning algorithms on historical data. Evaluation of risk and calculation of premium are the function of underwriters.
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