About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline

35 Ins. Counsel J. 398 (1968)
Automobile Liability Insurance Rates

handle is hein.journals/defcon35 and id is 404 raw text is: INSURANCE COUNSEL JOURNAL

Automobile Liability Insurance Rates
New York, New York

T HE IMPACT of the automobile on
the American public has stimulated
keen current interest in a number of facets
of insurance relating to this subject. The
system under which indemnification is pro-
vided to the motoring public in the United
States is being questioned increasingly by
consumers, by lawmakers and jurists, and
by insurance people. The most widely
voiced concern is the high and. ever-rising
price paid by insureds, particularly by the
owners of private passenger cars.
This paper was prepared to outline basic
procedures currently used in ratemaking
for automobile liability insurance. While
ratemaking is a technical field requiring
people trained in actuarial work, there is
need for a better understanding of it be-
yond the circle of actuaries. The paper
may also serve as a springboard to evaluate
the many changes that are currently being
advocated - for economic, political or so-
cial reasons - for this line of insurance.
Regulation of Rates
As is the case with any business in the
United States, excepting such monopolistic
enterprises as public utilities, automobile
insurance companies compete with each
other through price or through service, or
through both of these elements of buyer
appeal. This competition acts as a power-
ful and self-acting regulator of the price
of automobile liability insurance.
In addition, the making of rates for
automobile liability insurance - or, if you
will, the pricing - is regulated by laws
passed in the various states. These laws
establish the standards that rates have to
meet and they set forth the prerequisites
for the proper administration of the rate
regulatory function.
The statutory standards established by
the states for rates are defined usually by
this precept: Rates shall not be excessive,
inadequate or unfairly     discriminatory.
While the statutes in the several states may
use different language, the broad concept

graduate of Fordham Col-
lege and Fordham Law
School, is assistant gen-
eral manager of the In-
surance  Rating  Board.
An attorney admitted to
practice in the State of
New York, he serves on
the American Bar Asso-
ciation's Committee on
Public Regulation of the
Business of Insurance. He
is a Fellow by examina-
tion of the Casualty Ac-
tuarial Society and is currently serving as its
Vice President. He is also a member of ASTIN
(Actuarial Studies in Non-Life Insurance) Section
of the International Congress of Actuaries, and a
Member of the Board of Directors of the Ameri-
can Academy of Actuaries, where he serves on the
Committee of State Accreditation.
embodied in this phrase governs the mak-
ing and the regulation of rates generally.
The means by which the statutory re-
quirements are met are also broadly de-
fined in the statutes; again with some ex-
ceptions, most states require that, in the
making of rates:
Due consideration shall be given to past
and prospective loss experience within and
outside this state, to catastrophe hazards,
if any, to a reasonable margin for under-
writing profit and contingencies, to divi-
dends, savings or unabsorbed     premium
deposits allowed or returned by the insur-
ers to their policyholders, members or
subscribers, to past and prospective ex-
penses both countrywide and those spe-
cially applicable to this state, and to all
other relevant factors within and outside
this state.
To achieve the statutory standards, data
must be generated in the detail of a rating
system which recognizes differences by in-
dividual state, by subdivision within state,
and by classification of risk. The country-
wide and state data of the Annual State-
ment of insurance companies do not suffice
since it lacks such essential detail. These

Page 398

July, 1968

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.

Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Contact us for annual subscription options:

Already a HeinOnline Subscriber?

profiles profiles most