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The Risky Business of Insurance Pricing

In: Making Decisions About Liability And Insurance

Author

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  • W. Kip Viscusi

    (Duke University, Department of Economics)

Abstract

The factors influencing insurance pricing decisions are assessed using the ISO product liability ratemaking files for 1980–1984. The mean loss level has a strong positive effect on manual rates and premium rates/exposure. Evidence on a variety of ambiguity measures is more mixed. As a broad generalization, risk ambiguity lowers manual rates, which may reflect exclusion of large loss outliers as being unrepresentative. Risk ambiguity tends to have a positive effect on actual pricing decisions for particular policies, especially bodily injury lines and the interactive risk-ambiguity model.

Suggested Citation

  • W. Kip Viscusi, 1993. "The Risky Business of Insurance Pricing," Springer Books, in: Colin Camerer & Howard Kunreuther (ed.), Making Decisions About Liability And Insurance, pages 117-139, Springer.
    • Handle: RePEc:spr:sprchp:978-94-011-2192-7_8
    DOI: 10.1007/978-94-011-2192-7_8
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