Washington State Insurance Practice Exam

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Prepare for the Washington State Insurance Exam. Study with interactive flashcards and multiple-choice questions. Each question offers hints and explanations to help you succeed.

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What does class rating refer to in insurance?

Computing a price per unit of insurance for all applicants with a given set of characteristics
Evaluating individual risk based on past experience
Self-rating plan based on actual loses during policy period
Using a schedule of charges and credits to some base rate

The correct answer is: Computing a price per unit of insurance for all applicants with a given set of characteristics

Class rating refers to computing a price per unit of insurance for all applicants with a given set of characteristics. This method involves grouping applicants with similar characteristics into classes and assigning a specific rate to each class based on the expected loss experience associated with those characteristics. This system allows for a more efficient and standardized way of setting insurance premiums for different sets of risks. Now, let's discuss why the other options are incorrect: - Evaluating individual risk based on past experience (Option B) refers to experience rating, not class rating. - Self-rating plan based on actual losses during the policy period (Option C) relates to retrospective rating, where premiums are adjusted based on actual loss experience during the policy term. - Using a schedule of charges and credits to some base rate (Option D) aligns with the concept of merit rating, which involves adjusting the base rate up or down based on the specific characteristics of individual risks.