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Old 04-30-2019, 11:39 AM
we7dude we7dude is offline
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Join Date: Jan 2009
College: Temple Alumni
Posts: 325
Default conditional probability

Hello all,

Let's say for an insurance company, there are only two possible policy cancel reasons - Underwriting or Billing issues. I built two separate logistic reg to predict each cancel individually. In the UW cancel case, I removed the cancel due to Billing, which leaves only those that cancel due to UW and those never cancel; In the Billing cancel case, I removed the cancel due to UW, which leaves only those that cancel due to Billing and those never cancel. In an attempt to combine both attrition models into one, I plan to produce a combined probability of cancel, which is as follow: Prob of cancel = prob(cancel due to UW) + [1-prob(cancel due to UW)] * Prob(cancel due to Billing | Not cancel due to UW). Does this approach and/or formula make sense? Any other suggestions? Thanks in advance.

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