Rate Making

Rate making is the process insurance companies use to determine how much to charge for policies. They analyze past data on claims, risks, and costs to estimate future expenses. The goal is to set premiums that are fair to policyholders while ensuring the insurer can cover claims and operate profitably. This involves calculating average costs for similar policies, adjusting for factors like geography or age, and adding a margin for profit and expenses. Essentially, rate making balances risk assessment and financial sustainability to establish appropriate, competitive insurance prices.