Actuarial Justification

Actuarial Justification

Actuarial Justification

Actuarial Justification is where an insurance company must justify the premiums they collect are reasonable, given the benefits provided and that the premiums are distributed among policyholders proportionally to the distribution of their expected costs, subject to limitations of state and federal law.

ACA requires insurers to publicly disclose the actuarial justifications behind unreasonable premium increases.

Put in straight English, insurance companies must charge a fair price and distribute premiums among policy holders fairly according to individual risk and the law (ACA). Essentially, any insurance company desiring to increase their rates must ‘justify’ the rate increase with ‘actuarial’ (i.e. statistical) proof.

 

 

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