The rates that are used to determine premiums cannot be what?

The rates that are used to determine premiums must be adequate, not excessive, insufficient, or unfairly discriminatory. Each of these terms indicates a critical component of rate-setting guidelines in the insurance industry.

Excessive rates mean that the charges are higher than necessary to cover the expected losses and expenses; this would not be fair to policyholders. Insufficient rates imply that the insurer would not collect enough income to cover the anticipated claims and operational costs, potentially destabilizing the insurance provider’s financial standing. Unfairly discriminatory rates suggest that similar risks are charged different amounts without a justifiable basis, leading to inequities among policyholders.

These regulatory principles are grounded in ensuring that insurance remains accessible and equitable for consumers while maintaining the financial health and solvency of insurers. Adherence to these standards is critical in maintaining consumer trust and the integrity of the insurance market.