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📊 '''Individual risk rating''' is an [[Definition:Underwriting | underwriting]] methodology in which a [[Definition:Premium | premium]] is calculated based on the specific characteristics and loss profile of a single insured entity, rather than relying solely on broad class or group averages. This approach is most common in [[Definition:Commercial insurance | commercial insurance]] and large-account [[Definition:Property insurance | property]] or [[Definition:Casualty insurance | casualty]] lines, where the insured's unique exposures — such as claims history, operational hazards, safety practices, and financial size — justify a tailored pricing analysis. It stands in contrast to [[Definition:Manual rating | manual rating]], which applies standardized rates to an entire class of risk.

⚙️ Under this approach, the [[Definition:Underwriter | underwriter]] evaluates a combination of quantitative and qualitative factors specific to the applicant. [[Definition:Loss experience | Loss experience]] over a multi-year period is typically weighted heavily, often through techniques like [[Definition:Experience rating | experience rating]] or [[Definition:Schedule rating | schedule rating]], which adjust the base rate upward or downward depending on how the individual risk compares to class benchmarks. The underwriter may also consider on-site [[Definition:Risk assessment | risk assessments]], third-party inspection reports, and the insured's [[Definition:Loss control | loss control]] programs. For very large accounts, [[Definition:Retrospective rating | retrospective rating]] plans may tie the final premium directly to the insured's actual losses during the policy period, further individualizing the cost.

💡 Accurate individual risk rating is central to sustainable [[Definition:Underwriting profit | underwriting profitability]] because it aligns the price of coverage with the true hazard presented by each account. When done well, it reduces [[Definition:Adverse selection | adverse selection]] — the tendency for higher-risk applicants to seek coverage at inadequate rates — and rewards well-managed businesses with lower premiums, reinforcing positive [[Definition:Risk management | risk management]] behavior. As [[Definition:Insurtech | insurtech]] platforms bring richer data sources and [[Definition:Predictive analytics | predictive analytics]] into the rating process, the granularity and speed of individual risk rating continue to improve, giving carriers a competitive edge in both pricing precision and portfolio quality.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Experience rating]]
* [[Definition:Schedule rating]]
* [[Definition:Retrospective rating]]
* [[Definition:Manual rating]]
* [[Definition:Predictive analytics]]
* [[Definition:Adverse selection]]
{{Div col end}}

Definition:Individual risk rating - Revision history

PlumBot: Bot: Creating new article from JSON