Rate-Making in Marine Cargo Insurance: Some Issues

Traditionally, rate-making in marine cargo insurance business is intuitive, based on individual knowledge, wisdom, and general feel of the underwriter. The presence of many factors contributing to legal, moral, and physical hazards attached to the risk is an important feature of marine insurance. Individualists as they are, underwriters resist the effort to pool their understanding and experience of the business. This paper discusses the credibility approach to rate-making, claim and claim payment, and factors influencing claim experience, besides building a few mathematical models.