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for automobile insurers for owner-driver of age range
30 to 50.
(i) Accuracy is important for at least two reasons, the

market mechanism and fairness. In market economy,
insurers who price their products more accurately
can be more successful and competitive. Greater
accuracy requires more rating variables and a more
detailed classification. Another important reason of
accuracy is fairness. Similar conditions of groups
should have similar prices.

(ii) Homogeneity - The second actuarial condition is
homogeneity. This means that all the members of
the group who receive the same rate or premium
should have similar expected costs. Practically it is
difficult to know if all members do have similar costs.
The reason is the lack of credibility of individual
experience. Consequently, for many such rating
groups, subdivisions of the group may not have much
credibility than individual insured.

(iii) Credibility - A rating group should be large enough

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