The United States Postal Service's New Role: Territorial Ratemaking

Special Topics (narrow topic or advanced); For many years actuaries have recognized the importance of location as a major determinant of risk. Recently, new methodologies have been developed to better utilize geographic information systems (GIS) for territorial ratemaking. These new models generally require data assigned to a unit of geography (e.g., zip code, county, or latitude/longitude. Each unit of geography has specific advantages and disadvantages associated with it. A recent CAS survey verified zip codes are the most prevalent geographic unit used in the industry today. Unfortunately, zip codes possess a very undesirable characteristic: they are not static. This paper explores some of the issues that arise when creating, maintaining, and analyzing territorial boundaries and relativities based on zip codes.