Multiple Peril Ratemaking and Statistical Problems

The growing development of package policies embracing two or more major lines of insurance presents problems of considerable magnitude in both the statistical and ratemaking areas. The statistical problem might appropriately be mentioned first. Up to this point, with the exception of the homeowners policies, the various individual rating organizations have taken the position that statistical data for the coverages or lines of insurance which fall within their normal jurisdiction should be separately broken out and reported within their usual classification assignments. For the long pull, this seems to offer a rather serious problem so long as the development of the various package policies is geared toward what are considered to be the most desirable risks. While it is not known whether or not this will be the pattern in the future, at least up to this point, generally speaking, the various packages have been developed by companies or groups of companies with the apparent objective of attracting to themselves so-called "cream" business.