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In: Finance

Name and describe Objectives in Rate Making State the findings of Paul v. Virginia

Name and describe Objectives in Rate Making

State the findings of Paul v. Virginia

Solutions

Expert Solution

Rate Making:

Rate Making is a term related with insurance pricing. Rate Making is a technique used to determine premium for the risk exposure based on underwriting information. In this, the rate provides all the cost associated with risk transfer.

Objectives of Rate Making:

1. To set the prices in such a way that it provides sufficient fund to insurance company to pay for the claims based on exposures.

2. To set the price in such a way that the insurer will get sufficient return on the capital investment.

3. The rate shall not be inadequate and excessive.

4. To produce reasonably stable rate and resposnive to changes.

5. To encourage Loss control.

Paul v. Virginia Case

It is US corporate law case. The findings of the case:

1. A state statute which enacts that no insurance company not incorporated under the laws of the State passing the statute shall carry on its business within the State without previously obtaining a license for that purpose.

2. Corporations are not citizens within the meaning of the first of these clauses. They are creatures of local law, and have not even an absolute right of recognition in other States, but depend for that and for the enforcement of their contracts upon the assent of those States.

3. The issuing of a policy of insurance is not a transaction of commerce within the meaning of the latter of the two clauses, even though the parties be domiciled in different States, but is a simple contract of indemnity against loss.


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