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📏 '''Rating rule''' is a codified instruction — whether embedded in a [[Definition:Rating engine | rating engine]], published in a [[Definition:Rating manual | rating manual]], or mandated by a [[Definition:Rating bureau | rating bureau]] — that prescribes how a specific element of an [[Definition:Insurance | insurance]] [[Definition:Premium | premium]] must be calculated. Rating rules govern everything from which [[Definition:Rating variable | rating variables]] apply to a given [[Definition:Line of business | line of business]], to how [[Definition:Rating modifier | modifiers]] interact, to the sequence in which surcharges, discounts, and minimum premiums are applied. In effect, they are the business logic of insurance pricing, ensuring that every [[Definition:Policy | policy]] issued under a particular program is priced consistently and in accordance with filed or agreed-upon parameters.

⚙️ Within a [[Definition:Policy administration system (PAS) | policy administration system]], rating rules are typically implemented as conditional logic statements that execute during the [[Definition:Quote-bind-issue (QBI) | quote]] process. A rule might specify, for instance, that a [[Definition:Deductible | deductible]] credit of 5% applies when the chosen deductible exceeds $10,000, or that a [[Definition:Minimum premium | minimum premium]] of $2,500 overrides any calculated premium that falls below that threshold. In regulated markets, many rating rules originate from [[Definition:Insurance Services Office (ISO) | ISO]] or state-specific [[Definition:Rating bureau | bureaus]] and carry the force of regulatory approval — carriers that deviate must file and justify their departures. In [[Definition:Surplus lines | surplus lines]] and [[Definition:London market | London market]] business, rating rules tend to be internally developed and documented in [[Definition:Underwriting guidelines | underwriting guidelines]] rather than regulatory filings, but they serve the same structural purpose of ensuring pricing consistency across a portfolio.

🎯 Maintaining clean, current rating rules is a persistent operational challenge with significant financial consequences. A single misconfigured rule in an automated [[Definition:Rating engine | rating engine]] can systematically misprice thousands of policies before anyone notices, resulting in [[Definition:Premium leakage | premium leakage]] or unintended coverage terms. This risk intensifies as carriers adopt more complex [[Definition:Predictive modeling | predictive models]] with hundreds of interacting variables — each interaction effectively constitutes a rating rule that must be tested and validated. Regular [[Definition:Underwriting audit | audits]] of rating rule implementation, reconciliation between filed rates and system output, and version-controlled rule management are all essential practices. [[Definition:Insurtech | Insurtech]] vendors have begun offering dedicated rule-engine platforms that separate pricing logic from core administration systems, making it easier for actuarial and product teams to update rules without deep IT involvement.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Rating engine]]
* [[Definition:Rating manual]]
* [[Definition:Rating modifier]]
* [[Definition:Premium leakage]]
* [[Definition:Insurance Services Office (ISO)]]
* [[Definition:Underwriting guidelines]]
{{Div col end}}

Definition:Rating rule - Revision history

PlumBot: Bot: Creating new article from JSON