%%pdf-export%% [[Actuarial Notes Wiki|Wiki]] / [[Actuarial Techniques]] / ==Insurance Pricing== > **Insurance Pricing**, or **Ratemaking**, is the ==process of establishing rates used in insurance== or other risk transfer mechanisms.^[[Statement of Principles Regarding Property and Casualty Insurance Ratemaking](https://www.casact.org/sites/default/files/2021-05/Statement-Of-Principles-Ratemaking.pdf)] | Insurance Pricing Method | Description | | ------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------- | | [[Actuarial Present Value]] | Estimate the expected value of future cash flows, discounted to the present time. | | [[Trend Analysis]] | Estimate the value of premium, losses, and expenses trended to a future time period. | | [[Claims Development]] | Estimate future losses, developed to their ultimate value. | | [[Credibility Theory]] | Combine historical data with current observations to improve predictions. | | [[Experience Rating]] | Adjust premium based on the relative amount of loss that an insured party experiences - commonly used for [[Worker's Compensation]] Insurance. | | [[Risk Classification\|Segmentation]] | Predict the probability and severity of claims for homogenous risk groups. | | [[Rate Indication]] | Estimate the rate change needed to balance insurance costs and premiums for a future period. | ## Best Practices of Insurance Pricing The [[Actuarial Standards of Practice (ASOPs)]] publishes several standards that set best practice for insurance pricing. | Standard | Description | | ------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------ | | [📄PDF - ASOP 12]((https://www.casact.org/sites/default/files/2021-03/5_ASOP_12.pdf)) | [[Risk Classification]] | | [📄PDF - ASOP 13](https://www.casact.org/sites/default/files/2021-03/5_ASOP_13.pdf) | [[Trending]] Procedures in Property-Casualty Insurance | | [📄PDF - ASOP 30](https://www.actuarialstandardsboard.org/asops/treatment-profit-contingency-provisions-cost-capital-propertycasualty-insurance-ratemaking/) | Treatment of Profit and [[Contingency Provisions]] and the [[Cost of Capital]] in Property/Casualty Insurance Ratemaking | | [📄PDF - ASOP 39](https://www.actuarialstandardsboard.org/asops/treatment-catastrophe-losses-propertycasualty-insurance-ratemaking/) | Treatment of [[Catastrophe]] Losses in Property/Casualty Insurance Ratemaking | ### Casualty Actuarial Society In 1988, the [[Casualty Actuarial Society (CAS)]] published a [Statement of Principles Regarding Property and Casualty Insurance Ratemaking](https://www.casact.org/sites/default/files/2021-05/Statement-Of-Principles-Ratemaking.pdf) which aims to identify and describe principles applicable to the determination and review of property and casualty insurance rates. This statement was rescinded by the Board of Directors of the CAS December 2020, and soon after reinstated May 2021, for reference for U.S.-regulated ratemaking.