Interest Earnings as a Factor in Casualty Insurance Rate Making

It is generally known that interest earnings are an important factor in the making of rates for life insurance. The contract ordinarily runs for a long terra of years and interest earnings during the life of the policy must necessarily be taken into consideration in building the rates. Also, if a death claim is to be disbursed in installments over a term of years, interest is used in computing the value of the claim. Casualty insurance contracts, on the other hand, are ordinarily written on the one year term plan and claims are generally liquidated within a short time after they are incurred. The factor of interest earnings in casualty insurance, therefore, has been looked upon as of minor importance and has not been injected, to any extent, into ratemaking procedure. The underwriter has appreciated that this has produced a margin of safety--and the general feeling of all interested has been that this was a good practical treatment of the matter.