Filed Rate

Example

“The auto insurance company had to wait three months for state approval of their new filed rates before they could offer the updated premiums to customers.”

Memory Tip

Filed Rate = rates that are 'Filed' away in government cabinets before they can be used - like filing papers at the office.

Why It Matters

Filed rates protect consumers from arbitrary or discriminatory pricing by ensuring insurance companies justify their premiums with actuarial data. This regulatory oversight helps maintain market stability and prevents insurance companies from charging unfairly high rates or engaging in predatory pricing.

Common Misconception

Many consumers think insurance companies can change rates whenever they want, but most states require advance filing and approval of rate changes. However, people also mistakenly believe that filed rates guarantee the lowest possible price - rates only need to be 'not excessive,' which still allows for competitive variation among insurers.

In Practice

ABC Insurance wants to increase homeowners insurance rates by 8% due to increased wildfire claims. They submit actuarial data showing $50 million in losses to the state insurance department, requesting approval to raise the average annual premium from $1,200 to $1,296. After a 90-day review period and public comment process, the state approves a 6% increase to $1,272 instead. Only after receiving this approval can ABC implement the new filed rate. The entire process took four months and cost ABC $75,000 in regulatory filing fees and actuarial consulting.

Etymology

The term originates from the regulatory requirement established in the early 1900s that insurance companies must 'file' their rates with government authorities, creating a paper trail of approved pricing structures.

Common Misspellings

Related Terms

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Other insurance terms you should know

See Also