PROCEEDINGS May 15, 16, 17, 18, 2005 - Casualty Actuarial Society

518 ARCHITECTURE FOR RESIDENTIAL PROPERTY INSURANCE RATEMAKINGgradients in loss costs) was to be gained by rating at a levelmore resolved than county. Therefore, the remainder of the papershows rating factors that vary at the county level for nonhurricaneperils and the territory level for the hurricane peril.Definition of Base StructureAny base rate for property insurance reflects an assumptionabout the “base” structure insured. For non-modeled perils, this isimportant because all rating factors are keyed to the base house.For modeled perils, the definition helps incorporate public classificationstudies and build territory factors.First, base values insured by policy form for the calculationof key factors are:Form Base Value CoverageHO-2 $100,000 A (building)HO-3 $100,000 AHO-4 $10,000 C (contents)HO-6 $10,000 CHO-9 $100,000 AMH-2 $20,000 AMH-3 $20,000 AThese values are generally consistent with those used by advisoryorganizations such as ISO.Other base attributes, most following industry norms, are asfollows:² Base deductible is a flat $500 for all perils other than hurricane.² Base deductible for hurricane is 2% of the coverage A amount,in keeping with the Florida practice of percent rather than flatdollar deductibles for hurricane. This also aligns the proposedrating plan with the public domain studies promulgating classfactors for mitigation attributes.