B.1 Addressing an Imbalanced Fundamental Insurance Equation

Question 1

4 principles of property and casualty ratemaking

Answer 1

1. A rate is an estimate of the expected value of future costs.
2. A rate provides for all costs associated with the transfer of risk.
3. A rate provides for the costs associated with an individual risk transfer.
4. A rate is reasonable and not excessive, inadequate, or unfairly discriminatory if it is an actuarially sound estimate of the expected value of all future costs associated with an individual risk transfer.