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Acts of God and ManRuminations on Risk and Insurance$
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Michael Powers

Print publication date: 2014

Print ISBN-13: 9780231153676

Published to Columbia Scholarship Online: November 2015

DOI: 10.7312/columbia/9780231153676.001.0001

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The Good, the Bad,…

The Good, the Bad,…

The Role of Risk Classification

Chapter:
(p.142) 9 The Good, the Bad,…
Source:
Acts of God and Man
Author(s):

Michael R. Powers

Publisher:
Columbia University Press
DOI:10.7312/columbia/9780231153676.003.0009

Rate (or price) regulation is used extensively by many nations of the world and often relied on for market stability by developing countries. In the United States, the purpose of rate regulation is twofold: (1) to protect insurance consumers from excessive premiums or unfairly discriminatory premiums (i.e. premium differences that cannot be justified by differences in risk characteristics among policyholders); and (2) to protect insurance companies (and therefore insurance consumers) from inadequate premiums that may threaten company solvency. This chapter offers a brief summary of the objectives and methods of rate regulation. It then considers one of the most controversial aspects of insurance: the risk classification used in underwriting and rating.

Keywords:   rate regulation, price regulation, insurance premiums, insurance companies, risk classification, underwriting, rating

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