The AAIS Homeowners By-Peril Rating Plan
Homeowners insurers are under intense competitive pressure to rate policies more precisely for the level of risk they pose. Those that fail to do so face adverse selection.
AAIS has responded to this need by filing the first by-peril rating plan developed for use by any insurer seeking to achieve the pricing “granularity” and “actuarial lift” needed to maintain favorable operating results in homeowners insurance.
The plan is the product of a multi-year, multi-million dollar investment by AAIS to acquire data and sophisticated statistical tools, and to cultivate the actuarial expertise needed to implement this industry-leading rating plan.
Filed in most states on an advisory basis, the Homeowners By-Peril Rating Plan Manual consists of a multistate rules manual and state pages that provide:
- The state’s loss costs and rating factors;
- The state’s rating zone assignments;
- State-specific exceptions to the multistate rules; and
- Additional state-specific rules.
The plan uses a common rating algorithm for all perils, making it easy to incorporate the plan into company systems. The structure and design of the plan also makes it easy to add, delete, or modify perils.
Beyond its value for rating policies, the Homeowners By-Peril Rating Plan can serve as a tool to establish underwriting guidelines, marketing objectives, and reinsurance needs with precision.
Data sets and workbooks
The plan’s rating information is also available as data sets in two formats:
- Microsoft® Excel workbooks, which include documentation describing the contents of the tables provided; and
- XML, the “extensible markup language” used to structure data according to common standards so data can be exchanged among multiple systems.
Of particular value to companies that use the Homeowners By-Peril Rating Plan are the additional Microsoft® Excel workbooks developed to help a company create its own manual pages. For each state, two workbooks are provided:
- One allows a company to test the application of loss cost multipliers, either as a single multiplier for the entire state or several multipliers that can vary by zone and/or peril; and
- Another includes rating zone assignments, relativities and relativity factors, and loss costs for mandatory and optional coverages. Companies can use the workbook to change rating zone assignments and/or modify the corresponding rating factors and loss costs.
(NOTE: Most states require that companies file their loss cost multipliers as well as any company-specific deviations from the rating plan included in the AAIS filing.)
Insurance companies seeking more information on AAIS products and services can contact Rick Maka, director of marketing and strategic alliances, by our contact form or by calling 800-564-AAIS, ext. 222.