What is the purpose of using individual rating instead of class rating?

Using individual rating instead of class rating serves the specific purpose of accounting for the unique history of the applicant's claims. Individual rating allows insurers to evaluate and price the risk associated with a particular applicant based on their individual claims history, driving factors, and other relevant data rather than relying on broader class characteristics.

By focusing on the individual's specific situation, underwriters can more accurately assess risk and set premiums that reflect the actual likelihood of future claims. This method is particularly important in scenarios where the applicant's claims history is significantly different from that of the general population or the group they would otherwise belong to under class rating. As a result, it ensures that each policyholder is charged a premium that is commensurate with their risk level, which can be beneficial for both insurers and responsible policyholders.

In contrast, class rating might categorize clients into broader groups based on shared characteristics, resulting in premiums that may not accurately reflect an individual's unique risk profile.