Rate Filing
A formal submission by a carrier to a state insurance department requesting approval to use specific rates for a line of business.
What It Is
A rate filing is the formal process by which an insurance carrier submits proposed rates to a state insurance department for regulatory review. Rate regulation exists to ensure rates are adequate (sufficient to pay claims), not excessive (not unfairly high), and not unfairly discriminatory (consistent across similar risks). The specific regulatory approach varies by state and falls into several categories.
Prior approval states require the carrier to submit rates and receive regulatory approval before using them. File-and-use states allow carriers to file rates and begin using them immediately, subject to later regulatory review. Use-and-file states allow carriers to implement rates and file them within a specified period. Flex rating states allow rate changes within a defined band (such as plus or minus 7%) without filing, with filing required only for changes outside the band.
Rate filings include actuarial justification showing the data, methods, and assumptions supporting the proposed rates. The filing typically details loss experience, trend factors, expense provisions, profit targets, and the resulting rate change by class and territory. Workers compensation and personal auto rates are most heavily regulated, while commercial lines and surplus lines have more pricing flexibility.
Why It Matters for Brokers
Rate filings affect every policy a broker places. When a carrier files for a 10% rate increase in commercial auto, every commercial auto renewal with that carrier will reflect the increase regardless of individual account performance. Brokers who track carrier rate filings can anticipate pricing changes and proactively communicate with clients rather than being surprised at renewal.
Real-World Example
A major workers compensation carrier files for a 6.5% rate increase in a state effective January 1. The filing shows deteriorating loss experience in construction classes driven by increased medical costs. A broker with 45 contractor accounts on this carrier's WC program uses this advance knowledge to set renewal expectations with clients three months early, begin marketing the largest accounts to alternative carriers, and propose loss control investments that could offset the increase through improved experience mods.
Common Mistakes
- 1Being surprised by rate increases that were publicly filed months before renewal, which damages broker credibility with clients.
- 2Assuming rate filings apply uniformly when many filings include variable increases by class, territory, and policy size.
How brokerageaudit.com Handles This
brokerageaudit.com monitors publicly available rate filing data for major carriers and alerts brokers when a filed rate change will affect accounts in their book. The system estimates the premium impact on specific accounts based on their class codes and territories, enabling proactive client communication.