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Foundations of Casualty Actuarial Science

groups, the primary goals of individual risk rating are
to allocate costs to participants more accurately and
to motivate participation in risk control programs.

These are also the goals of individuals risk rating for
i ndi vi dual s, retai ni ng al l or part of the ri sks and
allocating the associated costs to various departments
or other uni ts. For i ndi vi dual enti ti es i n ei ther
si tuati ons, the uni ts to whi ch the costs are bei ng
allocated take the role of participantsor insured. Some
enti ti es may parti ci pate both as an al l ocator and
al l ocatee.

Themotivation to participatein risk control programsis
a secondary goal of insurers and other entities using
individual risk rating are to balance appropriately risk
sharing and risk bearing and to provide information to
design or modify risk control programs.

For individual entities, the allocation of costs to units
allows for more accurate pricing of products and
services.

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