Which of the following factors is considered when classifying risks for class rating?

When classifying risks for class rating, the combination of historical claims data and geographic location is essential for accurately assessing risk level. Historical claims data provides insight into patterns and frequencies of past claims that can directly impact the likelihood of future claims. This information helps insurers predict potential losses associated with similar risks in the future.

Geographic location plays a significant role in risk classification as it often correlates with certain risk factors, such as exposure to natural disasters, crime rates, and even economic conditions of specific areas. For example, a location prone to flooding or with a high incidence of vehicle theft would generally be classified as higher risk.

By considering both historical claims data and geographic location together, insurers can create a more comprehensive risk profile, which allows for better pricing and underwriting decisions. This holistic approach ensures that the classification of risks reflects the actual likelihood of claims occurring, thereby supporting the overall sustainability and accuracy of the insurance product.