Probability of theft in an area is 0.03 with expected loss of 20% or 30% of things with probabilities 0.55 and 0.45. Insurance policy from A costs $150 pa with 100% repayment. Policy with B, costs $100 pa and first $500 of any loss has to be paid by the owner. Which data mining technique can be used to choose the policy?

Decision trees mainly include categorization and estimation. It is often used as a measure of selection. This also encourages the usage and choice of particular data within the overall structure.

In the given situation, we should choose Policy A has cost $150 as it has 100% repayment while on the other hand Policy B has cost $100 and the first $500 of loss would be paid by the owner

So for choosing the policy, we use the decision tree data mining technique as we have to take the decision with respect to minimizing the cost

aquialaska aquialaska · Answer 2 · 2021-12-30T12:59:27+01:00

Data mining technique which can be used to choose the policy is decision tree.

The data mining technique that can be used are as follows,

Categorization and estimate are the two major functions of decision trees,
Decision tree frequently used as a selection criterion. This promotes the use and selection of specific data within the broader framework.

According to given data,

We should pick Policy A, which costs $150 and has a 100% payback rate.
Whereas, the owner would be responsible for the first $500 of loss under Policy B, which costs $100.

Here choosing the correct policy, decision tree is used.

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