Is there an ASOP that talks about considering policyholder impact when doing a rate change analysis & filing rates? For example, if the indications say raise rates by 30% but UW says that will cost us our market position, maybe only take rates up 10%,
I remember seeing the consideration of policyholder impact on exams but I cannot find which ASOP talks about that.
If there is no ASOP then is it actuarially sound to take the impact into consideration?
Given that mitigating “policyholder impact” is going to be more of a business decision than an actuarial decision, I don’t think you’re going to find an ASOP specifically on the topic.
I think in terms of “actuarial considerations” . . . I think it’ll come down to estimating impacts of not increasing rates to indicated and how that “shortfall” might be subsidized (this is something I think is mentioned/addressed in the Ratemaking exams) if one is looking to attend to overall premium volume.
For example, initial indications is going to be how much total premium volume will need to change; then classification analysis will determine how individual rates will change. If this latter is curtailed for a segment of the book, how do you make up for it from other segments that aren’t curtailed.
Sometimes though you won’t be able to make up the difference, say if you want to increase market share or if UW wants to limit the impact to any class at 15% and the indication is 30%.
I know that it is discussed on exams, I am looking for a source/paper that explicitly deals with this.
I don’t know that you’ll find anything written for an industry audience on this specifically. You may have company policies or guidelines that deal with this. You would also need to be consistent with anything you have filed with state regulators.
If you’re super concerned about your role in this, you could always reach out to the ABCD for guidance.
ETA: I wonder if any of the SOA professionalism sessions have discussed this. I don’t think those are recorded though.