A MLP Neural Network Approach for Validation of Health Insurance Customers in Big Data Environments

Subject Areas : Multimedia Processing, Communications Systems, Intelligent Systems

Saeed Shouri ¹ , ali cheshomi ² , Ahmad Seifi ³ , Rasoul Ramezani ⁴ , Taghi Ebrahimi Salari ⁵

1 - PhD. Student, Ferdowsi University of Mashhad, Mashhad, Iran
2 - Assistant Professor, Ferdowsi University of Mashhad, Mashhad, Iran
3 - Associate Professor of Economics, Department of Economics, Faculty of Economics and Administrative Sciences, Ferdowsi University of Mashhad
4 - Assistant Professor,The University of Texas at Dallas, Dallas, US
5 - Associate Professor, Ferdowsi University of Mashhad, Mashhad, Iran

Received: 2024-04-16 Accepted : 2024-06-08 Published : 2024-06-21

Keywords: Validation, health insurance, Claims-Based Risk, MLP neural network,

Abstract :

Introduction: Inadequate risk assessment of policyholders is a significant challenge in the health insurance industry. This research proposes a customer validation model for health insurance plans, focusing specifically on employees of the East Iran Oil Company.

Method: In this study, a Multi-Layer Perceptron (MLP) neural network with six steps is employed for customer validation. Weight training, a crucial step in neural network implementation, determines the influence of explanatory variables on the model's output. The trained model is then used for validation.

Results: Validation results indicate that health insurance claim variables and specific disease variables have the highest impact on unhealthy customer classification. Notably, the validation process identified approximately 1.8% of the population as "unhealthy." This seemingly small group accounts for a disproportionately high 17.47% of the company's total health insurance claims, despite currently being classified and charged premiums as healthy individuals.

Discussion: The proposed validation model offers a practical approach for insurance companies to assess customer risk profiles and tailor premiums accordingly. This approach promotes a more equitable and sustainable insurance system. JEL classification: C52, I13, C45

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