Pricing work: from rate indication to an implemented rate
A rate indication estimates the change needed for a defined portfolio under selected assumptions. It is not automatically the increase customers receive.
The analyst’s deliverables
A reproducible indication workbook or pipeline typically connects:
- Earned premium and exposure reconciled to source systems.
- Premium adjusted to a common rate level.
- Claims developed to ultimate and trended to the future exposure period.
- Large-loss treatment, catastrophe provision and relevant reinsurance costs.
- Fixed and variable expenses, with a stated profit or return assumption.
- Sensitivities and a recommendation explaining the main drivers.
A deliberately simple example
Suppose projected loss and loss-adjustment expense is 76 per exposure, current premium is 100, variable expenses are 25% of premium, and the selected margin is 5%. With no fixed expense in this toy model, required premium is 76 ÷ (1 − .25 − .05) = 108.57: an 8.57% indication.
That result does not by itself answer whether to implement 8.57%. Product teams still consider regulatory requirements, changes by segment, distribution, retention and effective dates. An implementation can differ from the indication; the decision and its expected consequences should be documented.
Routine versus project
Refreshing data, validating trends and explaining actual-versus-expected results is recurring work. Replacing the indication methodology or redesigning the rating plan is a project with testing, review and implementation dependencies.
Reading sources
ActNet editorial guide · October 1, 2026 · Original illustrative examples.