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📋 '''Excessive rate''' is a [[Definition:Premium rate | premium rate]] that regulators deem unreasonably high relative to the [[Definition:Risk | risk]] being insured, the expected [[Definition:Loss | losses]], and the reasonable expenses and profit margins of the [[Definition:Insurance carrier | carrier]]. Most state [[Definition:Insurance regulation | insurance regulatory]] frameworks in the United States require that rates not be inadequate, unfairly discriminatory, or excessive — and an excessive rate violates the first of these consumer-protection pillars. A finding of excessiveness typically means the rate generates profit far beyond what is actuarially justified.

⚙️ State [[Definition:Department of insurance (DOI) | departments of insurance]] evaluate rate filings using [[Definition:Actuarial analysis | actuarial standards]] and market data to determine whether a proposed rate is excessive. They compare the carrier's projected [[Definition:Loss ratio | loss ratio]], [[Definition:Expense ratio | expense ratio]], and [[Definition:Profit margin | profit provision]] against benchmarks for the line of business. In [[Definition:Prior approval | prior approval]] states, the regulator must sign off before rates take effect; in [[Definition:File and use | file and use]] jurisdictions, the regulator can order a rollback if post-implementation review reveals excessive pricing. Carriers found to be charging excessive rates may face penalties, mandatory refunds, or restrictions on their ability to write new business.

💡 The prohibition against excessive rates exists to prevent insurers from exploiting market conditions — such as a [[Definition:Hard market | hard market]] or limited competition in a given geography — to the detriment of [[Definition:Policyholder | policyholders]]. However, the boundary between a legitimately profitable rate and an excessive one is often contested. Insurers argue that [[Definition:Catastrophe risk | catastrophe risk]], [[Definition:Reinsurance | reinsurance]] costs, and emerging exposures like [[Definition:Cyber risk | cyber risk]] justify higher pricing, while consumer advocates and regulators push back when rate increases appear disproportionate to actual loss trends. This tension sits at the heart of ongoing debates over [[Definition:Rate regulation | rate regulation]] and market competitiveness.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Rate regulation]]
* [[Definition:Prior approval]]
* [[Definition:Inadequate rate]]
* [[Definition:Unfairly discriminatory rate]]
* [[Definition:Rate filing]]
* [[Definition:Loss ratio]]
{{Div col end}}

Definition:Excessive rate - Revision history

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