Washington State Insurance Practice Exam

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When is judgment rating used in insurance?

  1. When computing a price for all applicants with given characteristics

  2. When credible statistics are lacking or exposure units are too varied to construct a class

  3. When determining a final premium based on past loss experience

  4. When applying a schedule of charges and credits to a base rate

The correct answer is: When credible statistics are lacking or exposure units are too varied to construct a class

Judgment rating is used in insurance when credible statistics are lacking or when exposure units are too varied to construct a class. In such scenarios, underwriters rely on their expertise and judgment to determine a fair price for the insurance policy. This approach is necessary when traditional rating methods based on historical data or specific classifications are not applicable or available. The other options are not correct because they do not specifically pertain to when judgment rating is used in insurance.

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