Ex1.

1 Insurance Cost Prediction

1. Introduction

Predicting insurance costs accurately is crucial for both insurers and policyholders. Utilizing
linear regression techniques, we can analyze historical data and various factors such as age,
location, medical history, and lifestyle habits to develop a predictive model. By understanding
the relationship between these variables and insurance costs, we can provide more accurate
pricing estimates, ultimately benefiting both insurers and insured individuals.

2. Objectives

Develop a linear regression model to predict insurance costs based on relevant factors. Identify
key variables that significantly impact insurance pricing. Enhance accuracy in insurance cost
estimation to facilitate better financial planning and risk management for both insurers and
policyholders.

3. Data Collection
We'll collect insurance data from Kaggle, including relevant features, to train a linear
regression model for accurate predictive classification.
4. Data Cleaning and Preprocessing
● Missing values are handled through imputation techniques such as mean or median
imputation.
● Outliers are detected and removed using statistical methods or domain knowledge.
● Data is preprocessed by performing feature scaling, encoding categorical variables, and
handling any data transformations necessary for modelling.
5. Exploratory Data Analysis (EDA)

EDA is conducted to gain insights into the dataset:

● Visualizations such as histograms, scatter plots, and heatmaps are used to explore
relationships between variables.
● Key metrics such as customer lifetime value, purchase frequency, and average order value are
calculated and analyzed.
● Patterns and trends in customer behaviour are identified, such as seasonality or purchasing
trends.

8. Model Training

Models are trained using historical data:

● The dataset is split into training and testing sets

● In model training, we'll utilize the linear regression algorithm on preprocessed data to build a
predictive model for insurance cost prediction.

9. Model Evaluation

For classification tasks, metrics such as accuracy, precision, recall and F1-score are
computed.

10. Conclusion
In conclusion, our study demonstrates the efficacy of employing linear regression prediction for
insurance cost prediction.
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