Ratemaking 保险费率厘定

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Ratemaking保险费率厘定

Introduction

As a part of study of the insurance mechanism and the way it works, it will be helpful to examine some of the unique facets of insurance company operations. The unique nature（独特的本质、特点） of the insurance product requires certain specialized functions that do not exist in other businesses. In addition,financial record keeping of insurers deviates from common practices. This paper we will examine some of the specialized activities of insurance companies, and in the follwoing topics, we will look at the financial aspects of their operations.

Although there are definite operational differences between life insurance companies and property and liability insurers, the major activities of all insurers may be classified as follows:

1.   Ratemaking

2.   Production

3.   Underwriting

4.   Loss adjustment

5.   Investment

In addition to these, there are, of course, various other activities common to most business firms such as accounting, human resource management, and market research.

Ratemaking 

An insurance rate is the price per unit of insurance.Like any other price, it is a function of the cost of production. However, in insurance, unlike in other industries,the cost of production is not known when the contract is sold, and it will not be known until some time in the future, when the policy has expired. One fundamental difference between insurance pricing and the pricing function in other industries is that the price for insurance must be based on a prediction. The process of predicting future losses and future expenses and allocating these costs among the various classes of insureds is called ratemaking.保险产品与其他产品根本的区别是：出售保险合约的时候并不知道该产品的生产价格，定价是基于对将来还未发生的损失和费用。

A secondi mportant difference between the pricing of insurance and pricing in other industries arises from the fact that insurance rates are subject to government regulation. Virtually all states impose statutory restraints on insurance rates. State laws require that insurance rates must not be excessive, must be adequate, and may not be unfairly discriminatory. Depending on the manner in which the state laws are administered, they impose differing limits on an insurer’s freedom to price its products.保险产品定价的另一个重要特点是：，保险产品定价不能太高，但必须足够弥补损失成本和费用和合理利润，不能有不公平价格歧视，保险产品的定价的自由度受到相应法律、规则的限制。

The ratemaking function in a life insurance company is performed by the actuarial department or in smaller companies,by an actuarial consultingfirm.In the property and liability field, advisory organizations accumulate loss statistics and compute loss costs for use by insurers in computing final rates,although some large insurers maintain their own loss statistics. In the field of marine insurance and inland marine insurance, rates are often made by the underwriter on a judgment basis.保险费率厘定的工作主要由精算师来主导。

In addition to the statutory requirements that rates must be adequate, not excessive, and not unfairly discriminatory, there are certain other characteristics considered desirable. To the extent possible, for example, rates should be relatively stable over time, so that the public is not subjected to wide variations in cost from year to year. At the same time, rates should be sufficiently responsive to changing conditions to avoid inadequacies in the event of deteriorating loss experience. Finally, whenever possible, the rate should provide some incentive for the insured to prevent loss.

Some Basic Concepts

A rate is the price charged for each unit of protection or exposure and should be distinguished from a premium, which is determined by multiplying the rate by the number of units of protection purchased. The unit of protection to which a rate applies differs for the various lines of insurance.In life insurance, for example, rates are computed for each $1000 in protection; in fire insurance, the rate applies to each $100 of coverage.In workers’ compensation,the rate is applied to each $100 of the insured’s payroll.

Regardless of the type of insurance, the premium income of the insurer must be sufficient to cover losses and expenses. To obtain this premium income, the insurer must predict the claims and expenses and then allocate these anticipated costs among the various classes of policyholders. The final premium that the insured paysis called the gross premium and is based on a gross rate. The gross rate is composed of two parts, one designed to provide for the payment of losses and a second, called a loading, to cover the expenses of operation. That part of the rate that is intended to cover losses is called the pure premium when expressed in dollars and cents, and the expected loss ratio when expressed as a percentage.

Although some differences exist among different lines of insurance, in general, the pure premium is determined by dividing expected losses by the number of exposure units. For example, if 100,000 automobiles generate $30 million in losses, the pure premium (equals Losses  /exposure units )  is $300:                            

The process of converting the pure premium into a gross rate requires addition of the loading, which is intended to cover the expenses that will be required in the production and servicing of the insurance. The determination of these expenses is primarily a matter of cost accounting. The various classes of expenses for which provision must be made normally include

•   Commissions

•   Other acquisition expenses

•   General administrative expenses

•   Premium taxes

•   Allowance for contingencies and profit

In converting the pure premium into a gross rate, expenses are usually treated as a percentage of the final rate, on the assumption that they will increase proportionately with premiums. Since several of the expenses do actually vary with premiums(e.g.,commissions and premium taxes), the assumption is reasonably realistic.

The final gross rate is derived by dividing the pure premium by a permissible loss ratio. The permissible loss ratio is the percentage of the premium(and so the rate) that will be available to pay losses after provision for expenses. The conversion is made by the formula

Gross Rate=Pure Premium /(1−Expense Ratio)

Using the $300 pure premium computed in our previous example, and assuming an expense ratio of 0.40, we obtain Gross Rate

Although the pure premium varies with the loss experience for the particular line of insurance, the expense ratio also varies from one line to another, depending on the commissions and the other expenses involved.

致谢：

These ideas are the authors Emmett J.Vaughan and Therese M. Vaughan shared on the book

The fundamentals of risk and insurance 10^th edition, John Wiley& Sons, Inc.2008

The website is

http://197.14.51.10:81/pmb/GESTION2/FINANCE/0470087536FundamentalsRiskInsurance10.pdf