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Secrets Of The Insurance Kingdom: A Rate-Making Saga

Writer's picture: Chantal RobertsChantal Roberts

Insurance rate-making feels like deciphering an ancient scroll, especially when it’s often termed the art of insurance pricing. In the property and casualty insurance kingdom, this mysterious process holds great significance. Yet, behind the scenes, it’s the regulatory knights who set the stage.

Insurance professionals rating insurance
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Insurance rate-making walks a tightrope. Insurers juggle a lot of balls to ensure they set rates to cover their expenses but don't weigh heavily on their loyal villagers' pockets.


The Kingdom’s Guiding Principles


In our vast kingdom, each territory (or state) has its guardians. They lay down the law to ensure that the balance of justice in insurance pricing stays intact.


The first guiding principle is the essence of adequacy. Insurers must collect enough gold coins to honor their promises, creating a treasure trove that’s ready when villagers come with claims.


Even with murmurs of rising premiums in the alleys, there’s a steadfast rule against excess. Villagers shouldn’t feel burdened by paying more gold than the protection's genuine worth. Fair pricing is the heart of our kingdom’s ethos.


Another golden rule stresses the importance of fairness. In the grand courts of insurance, it’s frowned upon to charge different gold coins for similar risks. The kingdom thrives when all its residents, regardless of their stature, receive equal treatment.


So, going deeper into the property and casualty insurance kingdom, rate-making feels less like sorcery and more like a thoughtful, precise craft. Through this craft, insurers shield their villagers without emptying their reserves.


The moral? By understanding the secrets behind rate-making, villagers (that’s us) can choose their protective shields wisely. It’s not just math and regulations; it's also about upholding the kingdom’s core values.


For more insurance insights, please grab a copy of my book "Once Upon A Claim: Fairy Tales to Protect Your Ass(ets)  here.


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