Florida 2-20 General Lines Agent (Property, Casualty, Commercial Lines and Florida Law)General InsuranceHard
An insurance company uses a rating system where individual risks are evaluated based on their unique characteristics, and a specific rate is then calculated for that particular exposure. This method is often used for large, unusual, or complex risks. Which rating method is being employed?
- AJudgment Rating
- BExperience Rating
- CSchedule Rating
- DManual Rating
Show answer & explanationAnswer & explanation
Correct answer: A. Judgment Rating
Judgment rating is used when there is insufficient data to develop a class rate or manual rate. The underwriter uses their experience and judgment to determine the appropriate premium for unique or unusual risks.
Why the other options are wrong
- B. Experience rating adjusts a manual rate based on an insured's past loss experience.
- C. Schedule rating applies debits/credits to a manual rate based on specific risk features.
- D. Manual rating applies a pre-established rate from a manual based on risk class.
Judgment Rating
A rating method where the premium for an individual risk is determined by an underwriter's professional judgment and experience, typically for unique or complex exposures.
- Used when standard rating methods are not suitable.
- Relies heavily on underwriter expertise.
- Common for unusual or very large risks.
Memory trick: Manual is by the book, Experience is by history, Schedule is by features, and Judgment is by the expert.