Definition and Meaning
Deviated Rate: In the realm of general insurance, a deviated rate refers to a customized premium rate that an insurance company offers, which is lower than the industry-recommended or standard rate typically set by rating organizations.
Etymology
The term “deviated rate” derives from the verb “deviate,” meaning to depart from an established course. The notion of “rate” pertains to the pricing premium charged by insurance companies. Combined, “deviated rate” indicates a pricing strategy that diverges from the norm.
Background
Deviated rates came into prominence as companies sought flexibility and competitiveness in pricing. This approach provides insurance companies the autonomy to attract specific clientele by offering more appealing rates than those uniformly recommended or mandated by industry standards or rating bureaus.
Key Takeaways
- Individualization: Deviated rates allow insurance companies to tailor their offerings to specific market segments, making insurance more affordable for certain groups.
- Competitiveness: Insurers using deviated rates can gain a competitive advantage, effectively drawing clients away from firms adhering strictly to standard rates.
- Regulations: These rates are often subject to regulatory approval, ensuring that deviations do not undermine the financial stability of insurance companies.
Differences and Similarities
- Differences from Standard Rates: Standard rates are commonly set and recommended by industry associations or legal standards to maintain consistency and fairness. Deviated rates reflect a departure from these norms, offering potential savings to policyholders.
- Similarities to Experience Rating: Both deviated rates and experience ratings (pricing based on an individual’s claims history) aim to customize premiums but through different methodologies.
Synonyms
- Discount Rate
- Custom Rate
- Reduced Premium
Antonyms
- Standard Rate
- Recommended Rate
- Benchmark Rate
Related Terms
- Experience Rating: Adjusting premiums based on the insured’s history of claims.
- Rating Bureau: Organizations that establish pricing benchmarks for insurance policies.
- Premium: The amount paid for an insurance policy.
Frequently Asked Questions
What is a deviated rate in insurance?
A deviation rate in insurance is a customized price for a policy that is set below the recommended or standard rate by the insurer, with the aim of attracting specific customers or market segments.
Why would an insurance company offer a deviated rate?
Insurance companies may offer deviated rates to remain competitive, attract specific customers who might not afford the standard rates, or build a market presence in a new area.
Are deviated rates legal?
Yes, deviated rates are legal but typically require regulatory approval to ensure they do not threaten the financial stability of the insurer.
Exciting Facts
- Deviated rates can sometimes result from intense market competition, pushing companies to innovate in other service areas to retain profitability.
- Insurers may also strategically offer deviated rates to establish a foothold in new markets or demographics.
Quotations
Notable Quote:
“Innovation in pricing strategies, like deviating rates, often marks the difference between a thriving and declining insurance firm.” – Harper James
Proverbs & Sayings
- “You get what you pay for” — highlighting the importance of understanding why some rates may be lower and what it entails regarding coverage quality.
- “Cutting the cost but not the corners” — emphasizing offering competitive pricing while maintaining service quality.
Government Regulations
Depending on the jurisdiction, government bodies like insurance commissions or regulatory authorities oversee deviated rates to maintain market stability and prevent unfair practices.
Suggested Literature and Sources
- Principles of Risk Management and Insurance by George E. Rejda
- Insurance and Risk Management by P.K. Gupta
- Articles from Journal of Insurance Regulation.
Published on October 3, 2023, by Jonathan Holt. Remember, as funny as it sounds, deviated rates may not be deviants! They just march to a different financial drum. Until next time, keep your policies close and your discounts closer!
