AAIS Products and people you can rely on

NAIC Posts White Paper on Price Optimization

Dec. 18, 2015 AAIS Advisory notice

The National Association of Insurance Commissioners recently posted on its website the Price Optimization White Paper completed in November by its Casualty and Actuarial (C) Task Force.

Among other things, the 22-page document acknowledges that the term "price optimization" can have different meanings to different organizations, but that it generally involves formal inclusion of demand-related considerations in insurance ratemaking, in addition to loss and expense factors.

Among its recommendations, the paper states that "insurance rating practices that adjust the current or actuarially indicated rates or the premiums . . . should not be allowed when the practice cannot be shown to be cost-based or comply with the state’s rating law . . ."

Elsewhere, however, it adds that "capping and transitional rules can be in the public’s best interest but . . . regulators [should] consider the extent to which they will allow capping and transitional rating."

Language from the white paper has appeared in some of the bulletins by states that have recently prohibited or restricted the use of price optimization.

AAIS Advisory notices are posted periodically to announce AAIS product developments, and to provide news items that are relevant to our program users. Advisory notices are news summaries that paraphrase documents which should be consulted directly for complete, authoritative information.

Advisory Archives

Looking for an Advisory?




Subscribe to Viewpoint

Sign up and be qualified for a free subscription to Viewpoint.
Be the First to Know

Be the First to Know

Sign up to receive the latest AAIS Advisory email in your inbox.