Risk-Informed Machine Learning Models for Renewal Classification in Motor Insurance
Pichit Boonkrong, Junwei Yang, Xueyuan Huang, Teerawat Simmachan · Risks · 2026
This study develops an interpretable machine learning framework for type 1 motor insurance renewal classification using 70,290 real-world Thai policies, providing essential insights for pricing, customer retention, and operational decision making. The dataset was partitioned into a 70% training set, utilizing 5-fold cross-validation for hyperparameter tuning and model selection, and a 30% hold-out testing set to evaluate final model performance. Five machine learning models including Binary Logistic Regression, K-Nearest Neighbors, Support Vector Machines, Random Forests, and XGB are systematically evaluated across multiple curated feature sets generated through statistical filtering, stepwise selection, and permutation-based importance. Non-parametric tests are employed to compare model performance across scenarios. Experimental results show that a reduced four-feature Random Forest model (car age, net premium, sum insured, and car group) achieves the highest predictive performance (AUC = 99.62%; F1 = 98.15%), outperforming full-feature models while maintaining superior computational efficiency. Consequently, H2OAutoML serves as an external validation tool to verify that this manually curated, interpretable pipeline remains highly competitive with fully automated systems. Integrating a SHAP-based explainability layer quantifies predictor influence, ensuring transparency and regulatory alignment. Prioritizing feature parsimony, this study provides integrable insights for dynamic pricing and risk-adjusted retention, enhancing decision support within evolving motor insurance markets through transparent systems.