rate making
Quick Summary
In insurance, rate making is the process of determining the price, or premium, for a policy. This price is based on the risk associated with the insured item or person. Rates reflect three main components: the expected cost of losses, administrative expenses (known as "loading"), and a profit margin for the insurer.1
Actuaries are professionals who calculate these insurance risks and premiums. They analyze data to predict the likelihood of events like accidents, illness, or death, and then establish premium rates accordingly. The goal of rate making is to set prices that are fair, adequate to cover losses and expenses, and encourage loss prevention.21
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insuranceRate makingClosely associated with underwriting is the rate-making function. If, for example, the underwriter decides that the most important factor in discriminating between different risk characteristics is age, the rates will be differentiated according to age.
Read MoreClosely associated with underwriting is the rate-making function. If, for example, the underwriter decides that the most important factor in discriminating between different risk characteristics is age, the rates will be differentiated according to age.
Read More- insuranceGovernment regulation
States regulate four main aspects: rate making, minimum standards for financial solvency, investments, and marketing practices.
Read MoreStates regulate four main aspects: rate making, minimum standards for financial solvency, investments, and marketing practices.
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