Page 214 - ic92 actuarial

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they can manipulate 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.

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