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Foundations of Casualty Actuarial Science

the same accident frequency per hour worked and the
average claim size is a function of wages.

2. Marketing and Underwriting - Insurers may use
different strategies for pricing business. Though many
factors are related to cost potential, all the factors cannot
be objectively defined and rated.

Instead of pricing these factors, insurers may adjust their
marketing and underwriting practices to account for
them. Two common strategies are : (i) adjust price
according to individual cost potential, and (ii) accept an
individual only if the existing price structure is adequate.
The former is more common where the premiums are
high. Individual prices are usually formulated with larger
accounts, probably in dollars.

An alternative to the second strategy is to have several
different rate structures within the same insurance group.
Due to rate laws, several different insurance companies
are required to. Usually the underwriter, works with an
existing classification . Each rate level , presumably, has

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