Manual Rating

Example

“The insurance company used manual rating to price the small business policy, applying standard rates for restaurants in that zip code rather than conducting a detailed individual risk analysis.”

Memory Tip

Think 'Manual Rating = Rate Manual' - using a handbook or manual of standard rates rather than custom pricing for each individual.

Why It Matters

Manual rating makes insurance more accessible and affordable for small businesses and individuals by avoiding expensive individual risk assessments. It also ensures consistent pricing and prevents discrimination by applying the same rates to all similar risks.

Common Misconception

Many people believe manual rating means their specific risk factors aren't considered at all, but the rating manual does account for major risk variables like location, industry type, and coverage limits. However, it doesn't consider unique individual circumstances that might make a risk better or worse than average for its class.

In Practice

A small bakery applies for general liability insurance and falls into classification code 21501 (retail bakery). The manual rate is $0.85 per $100 of payroll, and with $150,000 in annual payroll, the base premium is $1,275. The manual then applies location factors (1.1 for urban area) and coverage modifiers, resulting in a final premium of $1,403 regardless of the specific bakery's individual loss history or unique risk features.

Etymology

From Latin 'manualis' meaning done by hand, referring to the manual or handbook containing standardized rates, combined with 'rating' from the concept of assessing or valuing.

Common Misspellings

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