How To Find The Right Subdivisions Into Tariff Classes

By intuition, the subdivision of an insurance portfolio into a number of classes is said to be good if it reflects the heterogeneity of the portfolio in an efficient way. To illustrate this rather vague statement we take the following very simple example: The portfolio consists of 20 independent risks, IO of them producing an expected loss ratio of say 30% each (type A risks) and 80% each (type B risks) respectively.