Abstract

This article introduces a novel in-processing method for integrating actuarial and equity fairness into neural networks used for actuarial valuation. We consider one primary network penalized during training to ensure balanced predictions (actuarial fairness) and independence from sensitive features (equity fairness). Global and local actuarial equilibrium is obtained by aligning the inter-quantile averages of predicted and observed responses. Meanwhile, a second auxiliary network penalizes the primary network for discriminatory predictions. The combined training algorithm effectively preserves predictive accuracy while mitigating discrimination. Numerical illustrations on real-world datasets demonstrate the method’s efficacy in achieving fair and reliable insurance pricing models.

Keywords: neural network, equity fairness, actuarial fairness, non-life pricing.

Sector: Insurance

Expertise: Non-life pricing

Authors: Donatien Hainaut

Publisher: Detralytics

Date: April 2025

Language: English

Pages: 27

Reference : Detra Note 2025-4

About the authors

Donatien Hainaut

Donatien Hainaut