[[Actuarial Notes Wiki|Wiki]] / [[Exam 5 (CAS)]] / **Generalized Linear Model (GLM)** ## Definition ==Generalized Linear Model (GLM)== is a statistical framework for analyzing insurance data and developing rate relativities that can handle various types of response variables and incorporate multiple rating factors simultaneously. ## Characteristics - Flexible distribution assumptions - Multiple variables analyzed together - Interaction effects captured - More sophisticated than traditional methods ## Common Distributions - Poisson (claim counts/frequency) - Gamma (claim severity) - Tweedie (aggregate losses) - Binomial (binary outcomes) ## Applications - Class plan development - Territory relativities - Rating algorithm optimization - Predictive analytics ## Advantages - Handles multiple variables - Statistical rigor - Interaction effects - Objective methodology ## Interpretation Results provide: - Relativity factors - Statistical significance - Model diagnostics - Predicted values ## Related Concepts - [[Classification Ratemaking#Definition]] - [[Credibility#Definition]] ## References - Werner & Modlin, Chapter 13