A class is a category of similar insured risks treated similarly for pricing, underwriting, and terms.
Underwriting use
Examples of class grouping include age cohorts, occupation, territory, or hazard type. The group improves pricing stability by combining enough homogenous exposures for reliable data.
Claims and pricing impact
Class-based segmentation affects:
- premium rate levels,
- deductibles,
- policy wording,
- and claim reserve expectations in that class.
Scenario
An insurer places homeowners in separate classes for standard homes, older high-hazard properties, and large-value residences. The high-hazard class carries a higher rate and stricter underwriting requirements due to historical loss concentration.