Cancel-for-Any-Reason Insurance Recommendation Using Customer Transaction-Based Clustering

Zhaleh Sadreddini,Ilknur Donmez,Halim Yanikomeroglu

doi:10.1109/access.2021.3064929

Zhaleh Sadreddini, Ilknur Donmez + Show 1 more

Open Access

https://doi.org/10.1109/access.2021.3064929

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Journal: IEEE Access	Publication Date: Jan 1, 2021
Citations: 33	License type: CC BY 4.0

Affiliation: Carleton University, Istanbul Arel University

Abstract

In the travel insurance industry, <italic xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">cancel-for-any-reason</i> insurance, also known as a cancellation protection service (CPS), is a recent attempt to strike a balance between customer satisfaction and service provider (SP) profits. However, some exceptional circumstances, particularly the COVID-19 pandemic, have led to a dramatic decrease in SP revenues, especially for non-refundable tickets purchased early with CPS. This paper begins by presenting a risk group segmentation of customers in an online ticket reservation system. Then, a CPS fee is recommended depending on the different customer risk groups provided by the cluster segmentation via different clustering algorithms such as centroid-based K-means, hierarchical agglomerative, DBSCAN, and artificial neural network-based SOM algorithms. According to the implemented cluster metrics, which include the Silhouette index, Davies-Bouldin index, Entropy index, and DBCV index, the SOM algorithm presents the most appropriate result. After predicting the new customer cluster, a CPS fee will be calculated with the proposed adaptive CPS method based on the cluster segmentation weights. Determining the weight of each cluster is related to the total CPS revenue threshold for all clusters defined by the SP. Therefore, to avoid a loss for SPs, the total CPS revenue will be kept constant with the threshold that the SP has been adjusted. The experimental results based on real-world data show that the risk group segmentation of customers helps to maintain a balance between CPS fees and SP profits. Finally, according to the calculated weights, the proposed model pegs the SP gain/loss variation with a 0.00012 exchange ratio.

Highlights

In the airline industry, as the price of flight tickets has increased over time, customers have often planned their trips as early as possible to take advantage of affordable booking opportunities
To help service provider (SP) overcome this loss, an optimal cancellation protection service (CPS) fee calculation is required to balance SPs revenues alongside customer expectations concerning the quality of experience (QoE) and CPS fees
The transactions are grouped according to the customers, and after grouping, some aggregation functions are performed

Summary

Introduction

As the price of flight tickets has increased over time, customers have often planned their trips as early as possible to take advantage of affordable booking opportunities. Changing one’s flight plans can result in high penalties for customers, which may turn their profits into a loss. Cancel-for-any-reason insurance allows customers to cancel their trip for any reason and receive a. Partial refund of their prepaid and non-refundable expenses, such as airline tickets and hotel accommodations. This insurance has some benefits from the customer’s point of view, especially for early birds purchasing non-refundable tickets, some exceptional cases, such as the COVID-19 pandemic, led to a dramatic decrease of service provider (SP) revenues. To help SPs overcome this loss, an optimal CPS fee calculation is required to balance SPs revenues alongside customer expectations concerning the quality of experience (QoE) and CPS fees

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Results