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

ARCHITECTURE FOR RESIDENTIAL PROPERTY INSURANCE RATEMAKING 519² Base liability limit is $100,000 and medical payments limit is$1,000.² Base fire protection class (PPC) is 9 (on the ISO scale of 1 to10). 18² Base construction type (for fire premium) is frame.² There is no base territory–the territory factors for hurricane,other wind, liability, and AOP are expressed and balanced relativeto the statewide average of 1.00.In the rating factor analyses for fire, AOP, and liability discussedbelow, actual experience data is used to develop indicatedfactors and various adjustments are made when it is necessary tobring experience to a “base class” level for a particular attribute.In contrast, the rating factors for modeled perils are determinedfrom an experimental data set consisting of hypothetical“base” structures placed around the state. An input data set wasbuilt containing one base structure in the geographic land centroidof every square mile section of the state–55,930 modeledlocations in all. This is similar to, but much more extensive than,the approach taken by ARA in their public domain study. Basehouse attributes are as follows:² HO-3 policy form insured for all perils;² $100,000 coverage A, coverages B/C/D at 10%/50%/20% ofA (respectively);² A $500 other wind and a 2% hurricane deductible;² Frame construction type;² Gable roof attached with clips and covered by standard shingles;18 Most companies and ISO use 3 as the base; our departure reflects the predominantlyrural demographic profile of our policyholders.