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📐 '''Manual rating''' is an [[Definition:Underwriting | underwriting]] pricing method in which [[Definition:Premium | premiums]] are calculated by applying published rate tables — known as manual rates — to a standardized set of risk characteristics, rather than through individualized risk assessment or negotiation. In insurance, these rate manuals are typically developed by [[Definition:Rating bureau | rating bureaus]], [[Definition:Advisory organization | advisory organizations]] such as the [[Definition:Insurance Services Office (ISO) | Insurance Services Office (ISO)]] in the United States, or by [[Definition:Insurance carrier | carriers]] themselves, and they assign base rates to categories of risk defined by factors like occupation, industry classification, territory, building construction type, or vehicle class. Manual rating forms the starting point for pricing across many personal and commercial lines, particularly [[Definition:Workers' compensation insurance | workers' compensation]], [[Definition:General liability insurance | general liability]], and [[Definition:Commercial property insurance | commercial property]] coverages.

⚙️ The process works by matching a given risk to the appropriate classification in the manual, then multiplying the corresponding rate by the relevant exposure base — payroll for workers' compensation, revenue or square footage for general liability, or insured value for property. Adjustments may then be applied through [[Definition:Schedule rating | schedule rating]], [[Definition:Experience modification | experience modification factors]], or [[Definition:Deductible | deductible]] credits to tailor the final premium closer to the individual risk's profile. In regulated markets, manual rates often require [[Definition:Rate filing | rate filing]] and approval from supervisory authorities; in the United States, states vary between prior-approval and file-and-use regimes, while in markets such as Japan and parts of Continental Europe, regulators have historically exercised tighter control over tariff-based pricing. The transparency and consistency of manual rating make it especially useful for high-volume, relatively homogeneous risk classes where individual underwriting of every account would be impractical.

💡 Manual rating provides a critical anchor of pricing discipline, ensuring that every risk within a class starts from a common, actuarially grounded baseline. Without it, [[Definition:Underwriting | underwriters]] operating in competitive markets might systematically underprice risks due to pressure or incomplete information — a phenomenon the industry calls [[Definition:Adverse selection | adverse selection]] or a [[Definition:Soft market | soft market]] race to the bottom. At the same time, the approach has limitations: it can be too blunt for complex or unusual risks, and it may fail to capture the individual loss potential that [[Definition:Experience rating | experience rating]] or [[Definition:Predictive analytics | predictive analytics]] would reveal. The modern trend, accelerated by [[Definition:Insurtech | insurtech]] and advanced [[Definition:Data analytics | data analytics]], is toward blending manual rates with more granular, data-driven pricing adjustments — using manual rates as a floor or reference point while allowing algorithmic models to refine the premium for each account.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Experience rating]]
* [[Definition:Schedule rating]]
* [[Definition:Rating bureau]]
* [[Definition:Predictive analytics]]
* [[Definition:Rate filing]]
* [[Definition:Underwriting]]
{{Div col end}}

Definition:Manual rating - Revision history

PlumBot: Bot: Creating new article from JSON