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  1. 3 primary purposes of RCS (risk classification system)
    • protect ins system's financial soundness against adv selection
    • enhance fairness - not unfairly discriminatory
    • permit economic incentives to operate to encourage widespread avail of coverage
  2. Basic RCS principles
    • reflect expected cost difference
    • distinguish among risks on the basis of relevant cost-related factors 
    • apply objectively
    • practical and cost-effective
    • acceptable to the public
  3. Considerations in designing a RCS
    • UW: must be well used to work
    • Marketing: must target variety of classses
    • Program design: degree of choice, exp based, P payer
    • Statistics: homogeneity, credibility, predictive stability
    • Operational: expense, constancy, avail of coverage, avoidance of extreme discontinuities, manipulation
    • Hazard reduction: desirable but not necessary
    • Public acceptability: diff to ascertain, vary among society segments, chg over time; incl privacy, relevant, fairness
    • Causality: not required
    • Controllability: desirable but not necessary
  4. 3 types of risk transfer
    • government programs
    • self-insured programs
    • private insurance
    • similarities: pooling of risks, large enough pool to guarantee reasonable predictability of losses
    • differences: provided by law / contract; compulsory / voluntary / self-supporting
Card Set:
2012-08-14 00:48:20
Risk Classification Principles

Risk Classification Statement of Principles
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