What type of rating method is typically used for new and small companies?

The manual rating method is particularly suited for new and small companies that may not yet have sufficient claims data to utilize other rating methods effectively. This approach relies on standard tables and guidelines established by insurance rating organizations or industry norms to determine premiums. By using manual rating, insurers can assess risk based on general factors such as age, health, occupation, and lifestyle, rather than specific historical claims data, which may not be available for a new company.

Manual rating provides a foundational starting point for underwriting and ensures that even companies with limited history can receive appropriate pricing based on established criteria. This approach is advantageous in maintaining fairness and consistency in premium assessments for new entrants in the market, allowing them to compete while they build their claims experience.

In contrast, experience rating methods are generally used for established companies with adequate claims history that can provide insights into their risk profile based on past performance. Blend rating typically merges aspects of manual and experience rating but may also require a more developed claims history than a new company possesses. Variable rating is not commonly classified as a standard method and could imply a range of approaches rather than a specific, established system useful for initial assessments of smaller or newer firms.