NAIC White Paper on Price Optimization

Overview

In this paper, the Casualty Actuarial and Statistical Task Force of the National Association of Insurance Commissioners provides background research on price optimization, identifies potential benefits and drawbacks to the use of price optimization, and presents options for state regulatory responses regarding the use of price optimization in ratemaking. The Task Force is not expressing an opinion on the policy decisions that have been or may be made by each state concerning rating practices that may incorporate price optimization. The primary focus of the paper is on personal lines ratemaking. Some of the concepts and principles may have application to other lines of business. Though price optimization could be used in risk selection, marketing, or other insurer operations, these issues are not addressed in this paper.

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