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What is a rating manual used for?
Used to classify and calculate rate for a risk
Written manuals are used to do what?
- Help agents understand the rating process
- File with insurance regulators
What information is needed to calculate premium for a given risk?
- Rate pages
- Rating algorithm
- Underwriting guidelines
What do rating manual rules contain?
- Contains qualitative information which helps user with rating algorithms
- Summary of available policy forms
- Premium determination considerations
- Classification of risk
What do Rate Pages contain?
- Contains the numbers needed to calculate premium
- E.g., base rates, rating factors, fees
What is a base risk?
Specific risk characteristic selected by insurer
- May be most common or selected based on marketing
- (e.g. for ML discount, if it is the base, those that don't qualify get a rate increase. Better image to have it as a discount if they qualify)
Base rate is applicable
What are Rating Algorithms and what type of items do they include?
- Provides the detail instructions to calculate the policy premium
- 1. Uses information in rules and rate pages
- 2. Includes such items as: Order to consider rating variables, How rating variables are applied (e.g., multiplicative, additive), Maximum and minimum premiums (or sometimes maximum discount or surcharge, Rounding instructions
What are the Underwriting Guidelines?
- Company-specific criteria for acceptance or placement of a risk
- Decisions to accept, decline, or refer risks
- Company placement
- Tier placement
- Schedule rating credits/debits