Increased Limits Ratemaking for Liability Insurance

Increased limits ratemaking focuses on the development of appropriate charges for various limits of liability coverages. Common liability lines of insurance include Personal Automobile Liability, Commercial Automobile Liability, General Liability, and Medical Professional Liability. However, as society continues to develop and grow, new sources of potential liability for individuals and businesses may arise --- such as liability for E-Commerce. Increased limits ratemaking requires specialized techniques. Quite often, the actuary is confronted with only limited available data when attempting to develop charges for high limits of liability coverages --- which may represent very significant potential loss exposures for an insurance company. Techniques for evaluating appropriate charges for various limits of liability insurance have evolved over the years. The current approach involves calculating a series of factors --- increased limits factors or ILFs --- which are applied to a rate or "loss cost" for a lower limit of liability (generally referred to as the "basic limit").