Randy Johnson is an insurance adjustor for a national auto insurance company. Using historical insurance claim data, Randy has built an insurance fraud detection model with the help of a data analyst. Applying the model on the validation data set generated the following confusion matrix. A fraudulent insurance claim is a Class 1 case while a nonfraudulent claim is a Class 0 case.

a. Compute the misclassification rate, accuracy rate, sensitivity, precision, and specificity of the classification model.
b. Should the data be oversampled to produce a more reliable classification model?
c. The confusion matrix was generated based on a cutoff rate of 0.5. If the cost of missing a fraudulent insurance claim is much higher than the cost of investigating a potentially fraudulent insurance claim, should the cutoff rate be increased or decreased when classifying claims?

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Actual Class Class 1 Class 0 Predicted Class 1 Predicted Class 0 170 27,298 130 2,402