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

546 ARCHITECTURE FOR RESIDENTIAL PROPERTY INSURANCE RATEMAKINGFIGURE 5territory, it is just as important to manage customer retentionwhen many existing insureds likely face significant rate changes.First, the actuary can inform the marketing and sales force bygeographic area in a comprehensive fashion. Figure 5 shows anexample of a “pin map” that delineates the proposed territoryboundaries and contains a color-coded pin for each existing insuredlocation. The shades indicate the spectrum of rate changesthat will be experienced by each location.Second, serious consideration should be given to a transitionplan that caps annual swings in premium to a maximum andminimum percent value, phasing in the premium change for thosesubject to severe rate dislocations. There is a legitimate debate asto whether such plans are inherently unfairly discriminatory, asnew business and renewals would be charged different rates foran identical risk. A complete discussion of the economics and