risk-based pricing

Risk-based pricing is an insurance practice involving the setting of premiums, rates, or other charges based on the insurer's assessment of the expected risk presented by the insured person, property, activity, or account. This assessment may look at loss history, location, use, coverage limits, deductibles, property characteristics, driving records, credit-based insurance scores, and other rating variables as allowed by law. The goal is to align the price charged with the likelihood of future claims. Higher-risk exposures generally pay higher premiums. That said, risk-based pricing is subject to actuarial standards, regulatory requirements, and restrictions, such as those on unfair discrimination.