Using R in Insurance GIRO 2012

Using_R_in_Insurance_GIRO_2012.Rmd

Using R in Insurance
==============================

```{r wordcloud, echo=FALSE, message=FALSE, fig.cap='Markus Gesmann, GIRO Brussels, 19 September 2012'}
library(ChainLadder)
library(googleVis)
library(wordcloud)
library(tm) 
## About GIRO, sourced from:
## http://www.actuaries.org.uk/events/residential/giro-conference-and-exhibition-2012/about 
giro <- "The 39th Annual GIRO Conference and Exhibition, the annual gathering
of the UK?s general insurance actuarial community, will be held at the heart of
Europe this September. The SQUARE is a striking conference centre in the
cultural centre of Brussels and one of the largest venues ever visited by GIRO
and its growing delegation. Although the implementation of Solvency II may have
suffered delays since the committee set its sights on Brussels some years ago,
I am delighted to report that we are very much on track in our preparations
for what promises to be a most enjoyable, stimulating and engaging programme.
The programme will attract diverse groups within our community. Ensuring
their broader appeal, our plenary sessions will again cover a wide range of
topics from pricing, reserving and capital to leadership, climate change and
the economy. To complement this, we have once again received an overwhelming
response to our call for workshops. The committee is continually grateful for
the support we receive in this regard and are very pleased to offer an array
of workshops which will suit all tastes.
Our theme for this year?s conference is Juggling uncertainty: the actuary?s
part to play. Uncertainty is a word that the actuary has long
contemplated  it underpins our profession?s motto ? and we are tasked
with understanding and communicating this to users of our advice.
Many of these users will not interpret this word in the same way ?
perhaps part of the ?understanding gap? identified in the Morris review.
Uncertainty is also a word that has not been far from the headlines in
recent times, not least when describing the current European economic situation.
In such times of apparent heightened uncertainty, there is more for us to
juggle, more questions for us to answer and, importantly, a bigger role for us
to fill. I hope our time in Brussels will give us an opportunity to discuss what
those questions are, deliberate one or two answers and examine the part which we
all, both individually and collectively, must play.
Two hours from London, although relatively compact, Brussels is unmistakably a
commercial and political hub. From the variety of languages, cuisines,
architecture and art present, it is equally clear that it has maintained
this status over many centuries. Having visited a number of venues within
the UK in recent years, the committee has responded to feedback in selecting
Brussels as a destination. I have no doubt that it offers a fitting backdrop
to many of our current issues and a suitable environment for those important
social elements of GIRO, both on- and off-programme. As always, we are excited
to be offering a fun-filled social programme and, for those of you staying in
Brussels for the weekend after the conference, I am confident that the city
will not disappoint. One certainty that I can profess is that GIRO will
continue to be an unrivalled opportunity for us to meet each other and
strengthen our community
"
wordcloud(giro,colors=brewer.pal(6,"Dark2"),random.order=FALSE, min.freq=1)
```

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# Hello - About me 
<ul> 
  <li>Name: [Markus Gesmann](https://plus.google.com/118201313972528070577/posts)</li>
  <li> Profession: Mathematician, working as an analyst at [Lloyd's](http://www.lloyds.com)</li>
  <li>Maintainer and co-author of two R packages:
  <ul>
  <li>[ChainLadder](http://code.google.com/p/chainladder/): Statistical methods for the calculation of outstanding claims reserves in general insurance
  <ul>
  <li>Used by actuaries around the world for reserving and teaching</li>
  </ul>
  </li>
  <li> [googleVis](http://code.google.com/p/google-motion-charts-with-r/): Interface between R and the Google Visualisation API
  <ul>
  <li>Used for data visualisation on www.lloyds.com <a href="http://www.lloyds.com/the-market/tools-and-resources/resources/statistics-relating-to-lloyds/visualisation">(1)</a>, <a href="http://www.lloyds.com/the-market/tools-and-resources/research/market-intelligence-toolkit/compare-countries">(2)</a></li>
  </ul>
  </li>
  </ul>
  </li>
  <li>Founder and co-organise of the <a href="http://www.meetup.com/KoelnRUG/">Cologne R user group</a></li>
  <li> Blogger: [mages' blog](http://lamges.blogspot.com)</li>
</ul>

# Agenda 

<ul>
<li>My motivation for using R</li>
<li>Brief history of R and its way into insurance</li>
<li>Three R examples</li>
<li>R for actuaries: Where to start?</li>
<li>How I created this presentation with R</li>
<li>Conclusions and discussion</li>
</ul>

# Why I started using R
<ul>
<li> I started in insurance in 2003, fresh out of university</li>
<li> I had used a variety of software, tools and languages already</li>
<li> But I had no experience with spreadsheets</li>
<li> I was surprised how people worked in insurance</li>
<li> I was really surprised what colleagues did with spreadsheets</li>
<li> I looked for alternative data analysis tools</li>
<li> All the cool kids were talking about R</li>
<li> I wanted to be cool as well</li>
</ul>
<a href="http://lamages.blogspot.com">
<img src="http://2.bp.blogspot.com/-NAMnviVPFnw/Tw_OJRa7kII/AAAAAAAAAIo/ERYyvM2dV84/s1600/photo-1.JPG" alt="mages blog" /></a>


# What is R?

<img src="http://www.r-project.org/hpgraphic.png" alt="R project" />
<ul>
  <li> <a href="http://www.r-project.org">R</a> is a free software environment for statistical computing and graphics </li>
  <li> It compiles and runs on a wide variety of UNIX platforms, Windows and OS X</li>
  <li> <a href="http://www.burns-stat.com/pages/Present/infernoishR_annotated.pdf">Notes on the history of R by Pat Burns</a></li>
</ul>

# R made its way from academia to industry
<ul>
  <li> R started at universities in the <a href="http://www.stat.auckland.ac.nz/~ihaka/downloads/R-paper.pdf">1990s</a></li>
  <li> It is still largely maintained by academics</li>
  <li> R is widely used for research publications</li>
  <li> <a href="http://lamages.blogspot.co.uk/2011/10/r-related-books-traditional-vs-online.html">Over 100 text books with R have been published already</a></li>
  <li> Today many graduates leave universities with some R knowledge </li>
</ul>

# R made its way from academia to industry
<ul>
<li> Many commercial applications support R: 
  <ul>
  <li><a href="http://www.oracle.com/us/corporate/features/features-oracle-r-enterprise-498732.html">Oracle</a>, <a href="http://help.sap.com/hana/hana_dev_r_emb_en.pdf">SAP Hana</a>, <a href="http://support.sas.com/rnd/app/studio/Rinterface2.html">SAS</a>, <a href="http://www-01.ibm.com/software/analytics/spss/products/statistics/developer/">IBM SPSS</a>, <a href="http://spotfire.tibco.com/~/media/content-center/datasheets/r-splus.ashx">Spotfire</a>, <a href="http://www.statconn.com">MS Office</a>, <a href="http://community.qlikview.com/docs/DOC-2975">QlikView</a>, etc.
  </li>
  </ul></li>
  <li> Commercial support is available from third parties, e.g.
  <ul>
  <li><a href="http://www.mango-solutions.com">Mango Solutions</a>, <a href="http://www.revolutionanalytics.com">Revolution Analytics</a>, <a href="http://www.trinostics.com">Trinostics LLC</a>, <a href="http://www.burns-stat.com">Burns Stats</a></li>
 <li>Or contact me</li>
 </ul></li>
  <li> R is established in many disciplines outside academia, e.g. <a href="http://cran.r-project.org/web/views/ClinicalTrials.html">pharma</a> and <a href="http://cran.r-project.org/web/views/Finance.html">finance</a></li>
  <li> The insurance industry is adopting R as well, e.g. <a href="https://docs.google.com/open?id=0By35Mtg9R9_RZTk5NzM1NGItYmUzMi00MmQ2LTk0MWYtYTY4YzZiNjg0ODc2">Lloyd's</a></li>
</ul>


# Why R in insurance?
<ul>
<li> 
Why Excel, SAS, SQL, SPSS, Minitab, …?
</li>
<li> 
<a href="http://www.johndcook.com/blog/">John D. Cook</a>: Why and how people use R
</li>
</ul>
<a
href="http://channel9.msdn.com/Events/Lang-NEXT/Lang-NEXT-2012/Why-and-How-People-Use-R"><img
width="400" src="http://ch9files.blob.core.windows.net/ch9/3f13/009c002a-e4ef-4aeb-95de-e7ecda173f13/LangNEXT2012JohnCookRLanguage_Custom.jpg" alt="John D Cook talk about Why and how people
use R"/></a>
<ul>
<li>
Because it gets the job done!
</li>
</ul>

# But why use a computing language?

<img src="https://lh5.googleusercontent.com/-0mb8ktQfQjE/TwU72nysQaI/AAAAAAAAI1g/EVOnQXhQsuM/s762/geeks-vs-nongeeks-repetitive-tasks.png" alt="Geeks vs Non-Geeks" />

By <a href="https://plus.google.com/102451193315916178828/posts/MGxauXypb1Y">Bruno Oliveira</a>


# Typical use cases for R in insurance 

<ul>
<li> Data transformation</li>
<li> Data analysis</li>
<li> Statistical modelling </li>
<li> Prototyping / ad-hoc work </li>
<li> End user computing </li>
<li> Background statistical engine for applications, e.g. pricing spreadsheet</li>
<li> Reporting and reproducible analysis, e.g. MI, Solvency II documentation  </li>
<li> Learning statistical and actuarial skills </li>
</ul>

# Three R examples
<ul>
<li>Reserving: Mack and Bootstrap chain-ladder</li>
<li>Automated reporting: Create PowerPoint slide with R output</li>
<li>Extracting data from a web page: Display earth quakes of the last 30 days</li>
</ul>

# Reserving: Mack chain-ladder

```{r ChainLadder, tidy=FALSE}
library(ChainLadder) ## load ChainLadder functions
data(GenIns) ## Famous Taylor / Ashe triangle
## For the purpose of the presentation we change the data slightly
dimnames(GenIns)$origin=2002:2011 ## original 1:10
GenIns <- GenIns/1000 ## Requires less space on slide
round(GenIns, 0) ## Display rounded figures
```

# Reserving: Mack chain-ladder

```{r results='asis', echo=FALSE, message=FALSE}
GenIns2 <- GenIns # example data set of the ChainLadder package
class(GenIns2) <- "matrix" # change the class from triangle to matrix
df <- as.data.frame(t(GenIns2)) # coerce triangle into a data.frame
df$dev <-  1:10
LC <- gvisLineChart(df, "dev", options=list(gvis.editor="Edit me!", 
                                            title="Incurred claims",
                                            hAxis='{title:"Development year"}',
                                            width=800, height=500))

print(LC, 'chart')
```

Chart created with <a href="http://code.google.com/p/google-motion-charts-with-r/">googleVis</a>

# Reserving: Mack chain-ladder

```{r}
M <- MackChainLadder(GenIns, est.sigma="Mack")
M
```


# Reserving: Mack chain-ladder
```{r fig.cap="Check for trends in the residuals plots to verify if the Mack-model is reasonable"}
plot(M) ## Default plot of a Mack chain-ladder output
```


# Reserving: Mack chain-ladder
```{r fig.cap="Plot of developments, forecasts and standard errors"}
plot(M, lattice=TRUE)
```

# Reserving: Bootstrap chain-ladder

```{r}
B <- BootChainLadder(GenIns, R=999) ## 999 bootstrap replicates
B
```


# Reserving: Boot chain-ladder
```{r fig.cap="Check if the model is reasonable"}
plot(B) ## Default plot of a Bootstrap chain-ladder output
```


# Automated reporting: Create PowerPoint slide with R output
```{r eval=FALSE, tidy=FALSE}
myfile=tempfile()
win.metafile(file=myfile)
plot(M, lattice=TRUE)
dev.off()
## Load MS Office interface statconnDCOM
library(rcom)
## Run VBA code from R
ppt<-comCreateObject("Powerpoint.Application")
comSetProperty(ppt,"Visible",TRUE)
myPresColl<-comGetProperty(ppt,"Presentations")
myPres<-comInvoke(myPresColl,"Add")
mySlides<-comGetProperty(myPres,"Slides")
mySlide<-comInvoke(mySlides,"Add",1,12)
myShapes<-comGetProperty(mySlide,"Shapes")
myPicture<-comInvoke(myShapes,"AddPicture",
                     myfile, 0,1,100,10)
```
Check license requirement for commercial use of <a href="http://www.statconn.com/products.html#pricing">statconnDCOM interface</a>.

# Extracting data from a web page 

```{r results='asis', tidy=FALSE}
library(XML)
library(googleVis)
## Source data diretly from the web
url <- "http://www.iris.edu/seismon/last30.html"
eq <- readHTMLTable(readLines(url),
 colClasses=c("factor", rep("numeric", 4), "factor"), which=2)
## Format location data
eq$loc=paste(eq$LAT, eq$LON, sep=":")
```
<!-- <div align="center"> -->
```{r results='asis' , echo=FALSE, message=FALSE}
tbl <- gvisTable(eq, options=list(width=800, height=250))
print(tbl, 'chart')
```
<!-- </div> -->

# Display earth quake information of last 30 days
```{r tidy=FALSE}
library(googleVis)
## Create a geo chart with the Google Chart API
G <- gvisGeoChart(eq, "loc", "DEPTH km", "MAG",
                   options=list(displayMode="Markers", 
                   colorAxis="{colors:['purple', 'red', 'orange', 'grey']}",
                   backgroundColor="lightblue"), chartid="EQ")

```
```{r eval=FALSE}
plot(G)
```
<!-- <div align="center"> -->
```{r results='asis' , echo=FALSE, message=FALSE}
print(G, 'chart')
```
<!-- </div> -->

# Getting started with R in actuarial work

<ul>
<li><a href="http://www.dummies.com/store/product/R-For-Dummies.productCd-1119962846.html">R for Dummies</a> by Joris Meys and Andrie de Vries</li>
<li><a href="http://toolkit.pbwiki.com/f/R%20Examples%20for%20Actuaries%20v0.1-1.pdf">Introduction to R for Actuaries</a> by Nigel de Silva</li>
<li><a href="http://www1.fee.uva.nl/ke/act/people/kaas/ModernART.htm">Modern actuarial risk theory using R</a> by Kaas, Goovaerts, Dhaene and Denuit</li>
<li><a href="http://www.slideshare.net/dataspora/an-interactive-introduction-to-r-programming-language-for-statistics">An Interactive Introduction To R</a> by Michael Driscoll and Dan Murphy</li>
<li><a href="http://www.favir.net/">Formatted Actuarial Vignettes in R</a> by Ben Escoto</li>
<li><a href="http://www.actuaries.org.uk/system/files/documents/pdf/actuarial-toolkit.pdf">An Actuarial Toolkit</a> presented at GIRO convention 2006 in Vienna</li>
<li><a href="http://lamages.blogspot.co.uk/2011/09/r-and-insurance.html">Using R at Lloyd's</a> poster at UseR! conference 2011 in Warwick</li>
<li><a href="http://wwww.r-bloggers.com">R-Bloggers</a></li>
</ul>

# R packages for actuaries on CRAN

<ul>
<li><a href="http://cran.r-project.org/web/packages/actuar/index.html">actuar:</a> Loss distributions modelling, risk theory (including ruin theory), simulation of compound hierarchical models and credibility theory</li>
<li><a href="http://cran.r-project.org/web/packages/ChainLadder/index.html">ChainLadder:</a> Reserving methods in R</li>
<li><a href="http://cran.r-project.org/web/packages/copula/index.html">copula:</a> Multivariate Dependence with Copulas</li>
<li><a href="http://cran.r-project.org/web/packages/cplm/index.html">cplm:</a> Monte Carlo EM algorithms and Bayesian methods for fitting Tweedie compound Poisson linear models</li>
<li><a href="http://cran.r-project.org/web/packages/evir/index.html">evir:</a> Extreme Values in R</li>
<li><a href="http://cran.r-project.org/web/packages/fitdistrplus/index.html">fitdistrplus:</a> Help to fit of a parametric distribution to non-censored or censored data</li>
<li><a href="http://cran.r-project.org/web/packages/lifecontingencies/index.html">lifecontingencies:</a> Package to perform actuarial evaluation of life contingencies</li>
<li><a href="http://cran.r-project.org/web/packages/lossDev/index.html">lossDev:</a> A Bayesian time series loss development model</li>
<li><a href="http://cran.r-project.org/web/packages/mondate/index.html">mondate:</a> R package to keep track of dates in terms of months</li>
</ul>


# Meet the R experts

<table>
<tr>
<td>
<ul>
<li><a href="https://stat.ethz.ch/mailman/listinfo/r-sig-insurance">R special interest group insurance email list</a> </li>
<li> <a href="http://www.londonr.org">London R user group</a></li>
<li> <a href="https://www.rmetrics.org">R/Rmetrics Meielisalp Workshop on Computational Finance and Financial Engineering</a></li>
<li> <a href="http://www.rinfinance.com">R in Finance, Chicago</a></li>
<li> <a href="http://www3.uclm.es/congresos/useR-2013/">UseR! 2013, University of Castilla-La Mancha, Spain</a> </li>
</ul>
</td><td>
<img height="350px" src="http://photos1.meetupstatic.com/photos/event/7/a/highres_133320122.jpeg" alt="London R photo" />

London R user group meeting
</td>
</tr>
</table>



# How I created this presentation with RStudio, knitr, pandoc and slidy  
<ul>
<li> [knitr](http://yihui.name/knitr/) is a package by [Yihui Xie](http://yihui.name/) that brings literate programming to a new level 
  <ul>
  <li>It allows to create content really quickly, without worrying to much about layout and R formatting</li>
</ul></li>
<li> [RStudio](http://rstudio.org) integrated knitr into its IDE, which allows to knit Rmd-files by the push of a button into markdown</li>
<li> Markdown output can be converted into several other file formats, such as html, with [pandoc](http://johnmacfarlane.net/pandoc/)</li>
<li> [slidy](http://www.w3.org/Talks/Tools/Slidy2/Overview.html) is one of the options to create interactive html-slides with pandoc</li>
<li> For more details see my recent [blog post](http://lamages.blogspot.co.uk/2012/05/interactive-reports-in-r-with-knitr-and.html) and [source code of this talk](https://gist.github.com/3687713).</li>
</ul>
<pre><code>
Rscript -e "library(knitr); knit('Using_R_in_Insurance_GIRO_2012.Rmd')"
pandoc -s -S -i -t slidy --mathjax Using_R_in_Insurance_GIRO_2012.md 
  -o Using_R_in_Insurance_GIRO_2012.html
</code></pre>


# Conclusions

<ul>
<li> R comes with lots of functions for actuarial work</li>
<li> It provides an ideal framework for end user computing</li>
<li> R can automate the production of reproducible reports and presentations</li>
<li> The momentum behind R has grown significantly over the last 5 years</li>
<li> Today R is often known by graduates - open up to their ideas</li>
<li> Many other software products developed R interfaces </li>
<li> New business models have evolved and will evolve</li>
</ul>

# If you liked this presentation ...
... you may also like:
<ul>
<li><a href="http://lamages.blogspot.co.uk/2012/09/interactive-web-graphs-with-r-overview.html">Interactive web graphs with R - Overview and googleVis tutorial</a>, Royal Statistical Society Conference, 2012</li>
<li><a href="http://www.rinfinance.com/agenda/2012/talk/MarkusGesmann.pdf">Overview of Lloyd's using R and googleVis</a>, R in Finance, 2012</li>
<li><a href="http://chainladder.googlecode.com/files/ChainLadder_Markus_20010Nov10.pdf">ChainLadder at the Predictive Modelling Seminar</a>, Institute of Actuaries, 2010 </li>
<li><a href="http://code.google.com/p/chainladder/downloads/detail?name=R_and_MS_Office-MG-20100504.pdf">How to integrate R into MS Office</a>, LondonR, 2010 </li>
<li><a href="http://lamages.blogspot.co.uk/2011/12/fitting-distributions-with-r.html">Fitting distribution with R</a>, blog post, December 2011</li>
<li><a href="http://lamages.blogspot.co.uk/2012/01/say-it-in-r-with-by-apply-and-friends.html">Say it in R with "by", "apply" and friends</a>, blog post, January 2012 </li>
</ul>

# Questions?

<ul>
<li> Idea: R in Insurance Workshop - Interest? </li>
<li>Contact: markus dot gesmann at gmail dot com</li>
</ul>


# R version and packages used for this presentation
```{r}
sessionInfo()
```