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Foundations of Casualty Actuarial Science

the rating system and insurers will seek verifications.
Controllability is an useful concept but there is a
shortage of usable rating variables.

(iii) Affordability - This is one of the most important
social consideration. In the context of risk
classification , high rates are often seen in refined
and sophisticated classification schemes. Another
E.g is correlation of income and insurance coverage,
as in Personal Accident insurance.

Another aspect of affordability is the necessity of
insurance and the availability. Though owing a house
or a car is optional , liability insurance or mortgage
insurance becomes compulsory. However, id the
rates are arbitrarily leveled or reduced below cost,
the market may not voluntarily provide coverage.
Thus rates may be affordable , but insurers may be
very reluctant to insure people at those rates.

Except for affordability issue, these social issues
are based on accuracy arguments. The basic

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