What is the most common form of insurance rating?

The most common form of insurance rating is manual or class rating. This method involves categorizing risks into various classes based on established criteria, such as the type of business, the nature of operations, and historical loss data. Insurers create rate manuals that outline these classifications and the corresponding premiums for each class. This approach enables insurers to assess similar risks uniformly, ensuring that the premiums reflect the risk profile effectively.

Manual rating is advantageous because it provides a systematic way to evaluate risks and sets a standardized pricing structure. Because it's based on broad statistical data, it simplifies the underwriting process and helps in maintaining consistency across various policies. Insurers can easily adapt to changes and trends in the overall market by updating these rate manuals.

In contrast, other rating methods like judgment rating are based on the underwriter's individual assessment of a risk, making it less uniform and potentially subject to inconsistency. Experience rating considers an individual policyholder's past loss experience, which can lead to more customized premiums but requires sufficient claims history to be effective. Merit rating combines elements of both experience and class rating but is used less frequently. Overall, manual/class rating remains the predominant method due to its efficiency and ease of application across diverse insurance products.