Total Return Pricing in Property-Casualty Insurance: The Massachusetts System

The insurance industry recognizes the need to develop improved ways of measuring the profitability of a given line of insurance. The traditional profit measure -- underwriting profit -- ignores investment income, which today is the property-casualty industry's major source of net income. Better profit measures would improve companies' ability to: (I) set fair and equitable rates, and (2) to manage -- i.e., to plan, monitor and measure performance.