By-peril rating, AAIS said, will be offered as an option to companies using the AAIS Homeowners Program, which will also include a traditional consolidated rating plan.

"The 10 peril structure gives the plan the flexibility needed to rate policies adequately across all states," said Deborah Summerlin, AAIS vice president of insurance lines, in a presentation at the recent AAIS "Main Event" conference in Fort Myers, Fla.

According to Mr. Summerlin, a plan that accommodates 10 causes of loss ensures that significant loss factors in different states are adequately reflected in the rating of a policy.

The plan utilizes a single rating algorithm for all perils, making it relatively simple to incorporate into company operations, and companies can simplify the plan further by reducing the number of perils, he added.

AAIS said its by-peril rating plan follows several months of thorough analysis of potential rating variables to identify those found to be predictive of loss. In that process, AAIS actuaries utilized the "Pretium" statistical software platform developed by Towers Watson, the international actuarial consulting firm.

"Our actuarial staff would run and re-run our models multiple times to determine relativities," Summerlin said. "As a result of that analysis, three of 35 weather variables, and two of five crime variables, were determined to have significant impact on loss."

"In all," she said, "the use of by-peril rating will allow an insurer to develop a premium to reflect the unique exposure posed by a risk."

AAIS President Paul Baiocchi concluded the presentation by saying, "We are providing our affiliates and potential new affiliates with a very powerful tool in a very cost-effective manner."

Information on affiliating with AAIS for use of its Homeowners Program can be obtained by contacting Rick Maka, director of marketing, at [email protected], or 800-564-AAIS, ext. 222.