GLM for Dummies (and Actuaries)

Generalized Linear Models (GLM) have become an insurance industry standard for classification ratemaking. However, some of the technical language used in explaining what a GLM is doing in its calculation can be obscure and intimidating to those not familiar with the tool. This paper will describe the central concept of GLM in terms of the estimating equations being solved; allowing the model to be interpreted as a set of weighted averages. The inclusion of prior information (in the Bayesian sense) follows naturally.