Surplus lines do not require much historical data to develop premium.

Study for the Michigan Surplus Lines Test. Prepare with flashcards and multiple choice questions, each question has hints and explanations. Get ready for your exam!

Surplus lines insurance is designed to cover unique or high-risk situations that may not be adequately addressed by standard insurance markets. Because of the nature of these risks, there is often a lack of extensive historical data available to develop premiums. This absence of data means that surplus lines insurers frequently rely on other factors, such as industry trends and loss assessments, rather than a lengthy history of claims data to determine appropriate premium rates.

The characteristics of the risks typically insured under surplus lines—often being atypical or specialized—make historical analysis less useful. As a result, surplus lines can set rates based on expert judgment, current market conditions, and actuarial considerations rather than on a proven historical loss experience.

Thus, it is accurate to assert that surplus lines do not require much historical data for premium development since they predominantly focus on unique risks that do not conform to standard data patterns.

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