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Rate evasion

The practice of claiming to live in an area with lower rates in order to avoid paying the higher rates in the area the insured actually lives in. Any attempt to avoid paying the correct, higher rates for coverage. Also known as rate jumping.

Rate making

MEDICAL,USA: Establishing premium rates for an insurance company’s policies by using a formula. In life insurance, important factors considered are mortality rates, interest rates, and loading.
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The process of developing pricing structures for insurance.
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A manual containing rates for various coverage, information and instructions for field underwriting, insurer’s rules for the guidance of agents and similar other risk acceptance guidelines.
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A manual that contains the rates for coverages, and can contain other items such as guidelines to field underwriting, agent guidelines, and cash forfeiture values.

Rate of gross profit

The rate of gross profit earned on the turnover during the financial year immediately before the date of damage, i.e. the ratio of gross profit to turnover. A business interruption policy pays the amount produced by applying the rate of gross profit to the reduction in turnover. Gross profit is calculated on the difference basis’.

Rate of return method

System of comparing costs of life insurance policies by using the following formula: 1. Determine pure cost of protection (mortality expectation). 2. Calculate amount of dividends paid. 3. Subtract the pure cost of protection plus dividends from the gross premiums paid into the policy (savings element). 4. Rate of return equals the interest rate at which the savings element must be accumulated to equal the cash value of the policy at a future specific time period. Also called Linton yield method .

Rate on line

A percentage arrived at by dividing reinsurance premium by reinsurance limit the inverse is known as the payback or amortization period. For example, a $10 million catastrophe cover with a premium of $2 million would have a rate on line of 20 percent and a payback period of five years.
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UK: A percentage arrived at by dividing reinsurance premium by the reinsurance limit, e.g. £5 million excess of loss cover with a premium of £1 million gives a rate on line of 20 per cent; the inverse, known as payback, is a period of five years. Rate on line is used to assess the adequacy of the contract rate.
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REINSURANCE: A percentage derived by dividing reinsurance premium by reinsurance limit; the inverse is known as the payback or amortization period. For example, a $10 million catastrophe cover with a premium of $2 million would have a rate on line of 20 percent and a payback period of 5 years.
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REINSURANCE: A rate of premium for a reinsurance which if applied to the liability accepted by the reinsurer will produce an annual premium sufficient to meet expected losses over a number of years.