Page 202 - ic92 actuarial

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(ii) 'Controllability' is a desirable rating variable
characteristic.
A controllable variable is one that is under the control
of the insured. If the insured moderates their
behavior in a certain way , premiums will be reduced.
E.g, by installing burglar alarms, the insured reduces
claim cost potential and hence receives discount.

The controllable rating variables encourage accident
prevention and protection. From a practical point of
view however, there may not be many controllable
variables. E.g, the make and model of automobile in
physical damage insurance is controllable.

Geographical locations is controllable in a broad
sense, but not very useful in making day to day or
short term decisions. E.g, moving petroleum refinery
is not practical, nevertheless the decision to locate
a structure is controllable and insurance costs may
be a factor in the decision. Controllable variables
may increase administrative costs. If the insured
has control over premium costs, they can manipulate

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