A Road Map for Rate Approvals

At a time when political and social pressures are making it more difficult for insurers to obtain rate change approvals, they need to carefully plan their defense of rate requests. While the strategy will vary according to the circumstances of each insurer and each forum, all insurers must show that...

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Bibliographic Details
Published in:Best's review (Property/casualty insurance ed.) 1991-04, Vol.91 (12), p.28
Main Authors: Harkawik, Dennis P, Pruitt, John S
Format: Magazinearticle
Language:English
Subjects:
Insurance rates
Litigation
Regulation
Requirements
Settlement
Online Access:Get full text
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Summary:At a time when political and social pressures are making it more difficult for insurers to obtain rate change approvals, they need to carefully plan their defense of rate requests. While the strategy will vary according to the circumstances of each insurer and each forum, all insurers must show that: 1. they developed the proposed rates consistent with actuarial practices, 2. loss data are accurate and loss trend factors are reliable, 3. expenses were prudently incurred, 4. a proper offset has been made to reflect investment income and tax benefits, 5. the profit afforded to the insurer by the proposed rates is the minimum profit needed to provide it with reasonable compensation for having put its capital at risk, and 6. the surplus used to calculate the allowance for profit is necessary for prudent business operations. It is in the insurers best interest to rely on its own data, as opposed to industrywide data, to provide a compelling fact basis for the requested rates. Unless settlement is a realistic possibility, insurers should aggressively litigate the issues.
ISSN:0161-7745