Premium is built from a price per unit of risk. A rate is that price—the amount charged per unit of exposure, such as per $100 of payroll, per $1,000 of building value, or per car-year. Multiplying the rate by the number of exposure units yields the base premium.

Rates are developed by actuaries from loss experience and loaded for expenses and profit. They may be class rates applying to groups of similar risks or specific rates for individual large risks. Regulatory review applies in many jurisdictions before rates can be used.

Changes in rates affect affordability and insurer competitiveness. Rate adequacy ensures that premiums keep pace with claim costs; excessive rates harm consumers and invite competition. Clear communication of rate changes helps policyholders understand the link between loss trends and the price of coverage.

• Price per unit of insurance exposure
• Multiplied by units to produce premium
• Developed from experience and loadings
• Often subject to regulatory approval