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Q1. What are the goals of individual risk rating?

Ans. The manual ratemaking determines what rates should
be charged to average members of groups of entities
for specified coverage and entity characteristics.
Individual risk rating supplements manual rates by
modifying the group rates in whole or in part to reflect
an individual entity's experience.

If all entities in all rating groups were truly homogenous,
differences in experience among entities would be
fortuitous. While homogeneity is the goal of manual
ratemaking, it is not usually possible to achieve. In
addition, some entities are large enough to make their
experience credible.

For an Insurer, the primary goal of individual risk rating
is to price the coverage provided more accurately than
if rates were based only on manual rates. Nontraditional
risk financing mechanisms also may use this technique
to allocate costs.

For groups of entities, such as pools or risk retention

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